DISSENTING VIEW

Evening Post, Volume CXXIV, Issue 60, 8 September 1937, Page 12

DISSENTING VIEW

EMPLOYERS' SIDE

LEGISLATIVE EXPERIMENT

Mr. Prime's dissenting opinion was as follows: —

"In various special enactments during periods of crisis in the past, the Legislature has required the Court, in dealing with wage rates, specifically to take into account two factors—(l) The general economic conditions affecting trade and industry, and (2) any increase or decrease in the cost of living. While on this occasion the Court is not proceeding under any special enactment, but is merely making a pronouncement for the general guidance of organisations of workers and of employers, it must, in giving consideration to any question of wage rates, have regard to the same two special factors, as it is obvious that these bear directly on the one hand on the ability of the employer to pay and on the other hand on the capacity of the worker to purchase.

"A review of the economic changes which have taken place during recent years, with an examination of the statistics relating to the cost of living, is therefore necessary before a decisioa can be made as to what are fair and reasonable standard rates of remuneration.

. "There is another factor, too, which requires consideration, a factor which did not operate when the Court was considering previous pronouncements; that :is, the effect of the statutory reduction of hours of work, and of other legislative enactments of the 1936 session of Parliament, including the restoration of wages to the rates operating in 1931 before the 10 per cent, reduction was made. "The experiment of almost simultaneously reducing working hours and increasing wages has been in operation for only about a year, and the practical consequences of the experiment cannot yet be fully determined. Those responsible for its application have explained that their purpose was to restore the prosperity of the Dominion by the progressively beneficial results of the two measures. The effect of the reduction of hours Was to be the absorption of more labour and consequently a substantial reduction in the numbers of persons unemployed. The increase in wages was expected to be reflected in such an expansion of spending power that the addition to wages costs would be j absorbed by larger turnover. ! OBJECTIVE UNLIKELY TO BE ATTAINED. "Some of the expected results have appeared,' the development of others has not fulfilled expectations, and the • actual consequences in some cases indicate that the general achievement ot the ultimate objective is unlikely to be attained. It may fairly be said that there has been a considerable revival ot commercial and industrial activity, but only a superficial or ill-informed observer would attribute these conditions entirely or even substantially to the effect of- the increased wages and shorter hours imposed by the legislation of last year. Statistics will show that these experimental changes have been made under the most favourable economic conditions, and that the present state of prosperity in the Dominion has developed rather in spite of than because of the effects of these changes. "It has been pointed out many times by competent authorities that New Zealand is dependent on overseas markets for an exceptionally large proportion of its aggregate income. That portion of its income which is derived from exports is increased or decreased by variations in export prices. Any increase or decrease in total income from exports, or, in other words, any increase or decrease in the value of production for export, is at once reflected in the purchasing power of the people, and in turn affects, by increase or decrease in demand, the value ot goods produced tor home consumption."

Mr. Prime quotes statistics making it apparent that the relative periods of prosperity, or depression have closely followed the variations in income from exports, and leave no room for doubt that the cause of the depression was the fall in Income from abroad.

I "The national standard-of living is determined by the total expenditure of the whole community, and this is measured by the 'amount available for home consumption/ During the seven years from 1923-2410 1929-30, the average was £111,400,000. The value of exports, which is beyond our control, averaged £51,200,000, or 45 per cent, of the national expenditure. Even in this period, the economic equilibrium had been disturbed, for unemployment became serious before 1930. In .the following five years, the value of exports was £41,000,000, so that the resources of those who had previously produced 45 per cent, of the national income were reduced by 20 per cent.

"This loss of £10,000,000 a year represented more than a reduction in purchasing power. Industries that had been operating economically were unable to recover the costs of production, and their activity was arrested by inability to purchase the requirements of their business and their personal needs." FALLACIOUS ARGUMENT. The argument that the value of the amount available for home consumption would have been sustained at 'a higher level if wages had not been reduced was fallacious. Evidently high wages could not sustain the local markets against the shock of a heavy fall in income from exports. The decline continued until 1932-33, but in the next three years during which wages were paid at the lower scale introduced in 1931 the value of production for home consumption rose in harmony with the recovery of income from exports, and in 1935-36 was at about the same level as in 1930-31. Employment also increased, for in 1935-36 86,588 were employed in factories, or 4000 more than in 1929-30. "It is claimed by those who advocate eevn higher wage rates than are generally paid at present that the country is now highly prosperous, and can afford to pay high wages," says Mr. Prime. "It is necessary to point ou., that the amount estimated as available for consumption in 1936-37 as shown by the above table barely reached the figure shown for the year.. 1929-30, the last year before the depression and the highest ever recorded. The country now appears to be prosperous, but it is only relatively so". In comparison with the recent years of depression, present conditions might well be described as a boom; but when compared with the pre-depression period they might better be described as normal. It must be realised that a continuance of prosperity depends largely on the maintenance of the present high prices for the goods we export, and also on the ability of local manufacturers to manufacture goods at prices which will allow them to meet the demand at prices which are largely dictated by overseascompetition. Herein lies the danger of raising wage rates to too high a level. In 1931 his Honour Mr. Justice Frazer pointed out that 'if wages are artificially maintained at an economically imposible level, unemployment, and the competition of imported commodities with our own manufactures will increase, fresh capital for further development of our industries will not be forthcoming from profits, and.recovery will be delayed.- ... COMPETITION OF IMPORTED GOODS. "The raising of the cost of production by the operation of an uneconomically high standard of wages and working- hours creates. an opportunity for competition by imported goods, and unless effective methods of exclusion are promptly applied, the consequences described by Mr. Justice Ff azer are ■ inevitable. Important industries ■ in.• New Zealand are already confronted by competition such as they have not encountered for many years. The • activity • -which has developed during the past year is in some industries already subsiding, and from all parts of the-country come reports that ■ orders for future delivery are declining." ■ • • ■ PERILS OF TOO FAST A PACE. . Having pointed out that a sharp advance in the wages of urban workers would inevitably undermine the basis of the guaranteed prices, Mr. Prime continues: ''One must admire and sympathise with the ideal of the present Government'to establish' and maintain a higher standard of living. But New Zealand. cannot live unto itself alone, and progress can be made only within the ljmit& of. practical accomplishment; Too fast a pace may well bring ruin and more widespread misery than the country has known before. And, given reasonably full-time employment, the present standard in New Zealand compares'favourably; witK any other country. Ministers of the Crown who have recently been abroad have said so."

Mr. Prime reviewed the cost of living and standard wage rates in the past and proceeded to adjust them on a 40-hour week basis as follows: —Skilled 2s 5.7 d per hour, semi-skilled 2s 1.3d to 2s 4.05 d, unskilled, 2s 0.2 d. One of the anomalies in the reduction of weekly hours was that formerly the difference in the rates of skilled and" unskilled workers was sd. The adjustment necessitated by hours reduction made the difference s|d.

"There was some confusion of thought evident at the hearing, in dealing with the case of unskilled workers, in the apparent assumption by some of the advocates that builders' and general labourers comprise the only class of unskilled workers to which the Court's standard wage rates apply," says Mr. Prime. "The truth is that there are dozens of awards covering various types of labour which are recognised as unskilled, and to which the Court's standard rate for unskilled workers is applied. Many of these awards relate to factory employment where work is constant and the worker gets the advantage of the holidays and special payments prescribed by the Factories Act. It is therefore unsound to tiave regard only to builders and general labourers in fixing the rate for unskilled workers." Except that employment had been more intermittent during recent years there was nothing to show that the circumstances of skilled workers were different now from other periods when their standard rate had been considered by the Court, said Mr. Prime. All the Court was required to do—all it could do—was to endeavour to fix rates at which it should be economically possible for employers to give reasonably full-time employment to workers The chief ends to be attained by the adoption of standard rates were to give a guide to parties in disputes, enabling them to effect settlements without reference to the Court and to ensure stabilisation so that industrialists might know with some ■ certainty what their labour costs would be for a reasonably long period. NO CAUSE FOR INCREASE. Mr Prime concludes that it was clear that on a cost-of-living basis alone no cause existed for an increase in the standard rates at present, but that with the increasing cost of living stabilisation of wages rates might be necessary to protect the worker against possible increases in the cost of living in the future. The rates decided on by a majority of the Court involved a greater increase than had taken place at any time in its history. Having made comparisons of the different forms of labour. Mr. Prime could not agree that the rates to be adopted by the Court should be any higher than 2s 7d an hour for skilled workers, 2s 21d to j 2s 5d an hour for semi-skilled, and i 2s Ud an hour for unskilled, which would put workers in a better position than ever before, though they might not be warranted by economic conditions, based as they were on the assumption that Industry, could pajr as