CAPACITY TO PAY

Evening Post, Volume CXXII, Issue 96, 20 October 1936, Page 10

CAPACITY TO PAY

ECONOMIC FACTOR

EMPLOYERS' CONTENTIONS

Mr. Bishop said that the basic wage, once declared, would be the foundation of a new wage structure, and therefore it was essential that the declaration, should be . economically sound. "In the presentation of my case," . stated Mr.' Bishop, "I do not propose ''to suggest any sum as., a basic wage, but rather to submit what I regard !• as essential factors to be considered, . leaving it to the Court to give to : the several factors their proper ■weight in the final calculation." He pointed out that the section of the legislation directing the declaration of a basic wage did not define an adult, although another 'section deemed a person of eighteen years to be an adult. The definition in the latter section, however, dealt with compulsory membership of unions and therefore did not help them very, much. In an award made by the Court in 1925, it was held that a worker in receipt of' less than the full minimum wage was not an adult and that a worker under that award became an adult at the age of 22. He submitted that the judgment was entirely sound, and he also submitted that in the light.of that judgment1 it was open to the Conciliation Council, or'to the Court of Arbitration, in making a new award, to include a scale of wages which would determine in each case at what age the basic wage should apply. He further, contended that the age might vary .as between one award or industrial agreement and another as the circumstances might require, and he quoted a number of awards which provided a gradual increase in wages, according to age or experience, until the full rate was reached. In- the awards made by the Court there was a clear recognition that. the age at which- the full minimum wage should be payable must vary with the class of work to be done and the prospects of further advancement. If an arbitrary definition of "adult" were to be adopted,' as for instance one who was 21 years of age, that principle would be entirely destroyed. All workers of 21 years would have to be paid :not less than the basic rate, and in many cases quite untrained workers. would be paid a wage far in excess of their capacity to; earn. He • instanced the difference between boys who remained at school for the purpose of training for professional careers and those who left school'early to take up unskilled manual labour. . Mr. Bishop submitted that under .the legislation governing the basic wage the Court must have regard to. first, the economic and financial conditions affecting trade and industry; second, the cost of living, arid—having had due regard to these things—should provide a sum which would maintain a man, wife, and three children in a fair and reasonable standard of comfort. THE ECONOMIC STRUCTURE. In a review of the financial and economic conditions of the Dominion^ Mr. Bishop submitted that the foundation of the whole economic structure was in the production of certain primary products for export. He did not wish to imply that the primary industries were the , whole economic structure, as the national income was, of course, made up of the product of all industries, but the importance of the export industries lay in the fact that they gave the means of securing supplies of those commodities which New Zealand was unable to produce and also the means of paying the overseas indebtedness. It had to be recognised that the purchasing power within the Dominion of all that section of the population which was en-1 gaged in the export industry depended entirely on the selling value overseas of the commodity they produced and j the sum total of that purchasing power I could not be increased by any artificial means. The raising of the rate of exchange, the guaranteeing of prices locally, and any other measures of that kind had the effect of redistributing the purchasing power of the Do-

minion, but they did not increase by i one fraction of a penny the total pur-1 chasing power. In a judgment of the i Commonwealth Court of Arbitration on I the basic wage, Mr. Justice Detheridge stated: "A wage regulating tribunal has to be guided by the trend of un- \ employment, of prices of primary and secondary products, and of their relationship to each other. Particularly ■ in Australia, which is so largely' de-j pendent upon its exports of primary j products, the necessity of adjusting the costs of secondary industries so that their products will come within I the purchasing capacity of the primary industries, must not be forgotten." "I cannot emphasise too strongly the point to which the learned Judge calls attention, namely, the necessity of adjusting costs of secondary industries so that their products will come within the purchasing capacity of the primary industries,"- said Mr. Bishop. "The purchasing capacity of the export or primary industries within New Zealand depends (1) upon the value of exports, and (2) upon the cost of locally-pro-duced goods and services. Obviously a 1 contraction in the value o£ exports and an increase of internal costs would have precisely similar effects upon the purchasing power of the export industries in the local market. DISPARITY IN PRICES. "During the last ten years, there has been a disparity between export prices and internal prices. For the years 1928-29 it was not great It was greatest in 1932. The latest figures indicate a substantial improvement, but there is stil^ a disparity too great for the economic' welfare of the Dominion. Even the latest figures show a contraction of the purchasing capacity of. the primary industries within New Zealand of 16 per cent, as compared with 1914. I wish here to make this point as' Strongly as I possibly can—that the full effect of the recent industrial legislation has not yet been reflected in retail prices. The effect cannot fail to be the widening of the gap between external prices and internal costs. ' "Wage increases' cannot fail to increase costs of production and in many cases such increases are cumulative. For instance an increase of 5 per cent, in wages paid to coal miners increases the total cost of coal production by from 3} to 4 per cent. This increase is passed oh to coal users and so affects the cost of rail and sea transport. This in .time'will affect costs, in all industries using rail or sea transport, either for securing their raw materials or 'for the distribution" of their products, and will also react further upon the cost of coal to consumers since practically all coal is. conveyed from mines .by rail, or sea,, or by both. wages And costs. "In' the same way, wage increases in the transport, industry, by • increasing transport charges, have an effect upon the costs of all other industries. Increased costs and prices must in the end result in reduced consumption followed by a falling off in production and employment. The major cause of the rapid increase of unemployment in New Zealand from 1929 onwards was the inability to get our internal costs into line with the reduced spending power which resulted from the fall in export prices. An increase in internal costs iri excess of the improvement in export prices at this stage cannot fail to set back our recovery from the depression of the last few years.' "In this first fixation of a basic wage for New Zealand the Court is faced with the necessity of finding a formula which will not only give a correct result for the present, but which shall be capable of use in the half-yearly adjustments which the' law provides for. I respectfully submit for the Court's consideration ■ this ■ suggestion—that a base period be adopted and a wage for that period calculated on.the value o£ production per head of population for that period arid adjusted-periodically to changes in the value of production per head. SUGGESTED WAGE BASIS. * "The value of production'and value per head are published in the Year 800k,.1936. The base period might be 1924-25 when there was full employmerit, or 1924-29 when there was some unemployment and consequently some allowance would have to be made for the fact that wages in that period were a little higher than the value of.production could stand. -Then- find, the value of production for the latest year —an estimate would be required—and the value per head.of population, and adjust the basic wage from that in the base period to' the present time in accordance with the change in the value of production per head. I suggest that if the. Court will select the base period, the appropriate wage for that, period and the method of adjustment, the Government Statistician might then be asked to work out the figures. I submit that as the value of production is the only source from which wages can be.paid, this method is scientific and; correct." ..,.-■! After giving an elaboration of the formula he proposed, and concrete examples of its application, Mr. Bishop added: VI submit that there' is no reason to question the several findings of the Court on the wage issue. The essential factors have been studied and given their proper weight, and the decisions of the Court have been sound. Moreover, the fact that industry was showing a satisfactory rate of expansion, that there was little unemployment and freedom from any serious industrial trouble, affords proof that the general standard of wages was in correct relationship to essential economic factors. "MATTER OF PLAIN FACT." "Discussing wage fixation by1 the Court of Arbitration at the 1928 Industrial Conference, Professor Fishec said: 'The fact that I am assured by intelligent and sincere partisans on either,side that the Judge.always gives the unions what they ask for; and thaihe also always gives the employer j what they ask for, encourages me to believe that he has succeeded, broadly speaking, in fixing wages vex-y near the level t'n'which they would be directed by the operation oi economic forces, but that this has been doni with a groat deal . less friction . than would have accompanied any alternative mode of regulation.1 The relation between wage payments and production is indeed not a matter of exhortation. It js a matter "of plain' fact. People who ai;e not, doing work equal in'• value, to the .wages they receive will soon lose their jobs,' ■ . ''•This conclusion .'.s in no way .upset by reason of.' the fact that subsequently the disastrous fall in export prices, which was due tv causes quite beyonvi our control, threw our economic machinery out of gear. "I submit therefore thai. the base period to be adopted by the. Courtshould be the 1924-25 year, and that the basic wage declared by the Cou'l. of Arbitration in September,.. 1925, should be taken as the wage for the base period'to be adjusted in proportion to changes in the value of production per head of population in order to arrive at the correct basic wage for the present time." ' ■' It is reported from Hawke's Bay that R. de R. Worker, a well-known cricket representative, has announced his retirement as a player. During a notable cricketing career, Worker has played in club and representative matches in the four main centres, as well as iii Hawke's Bay. The Wellington Cricket Association's management committee is writing-to 'him expressing 'keen appro-] ciation of his services as a player and congratulating him upon his . fine record. . - ,