WAGES AND PRICES

Evening Post, Volume CXXV, Issue 115, 18 May 1938, Page 10

WAGES AND PRICES

REPLY TO MB. tf ASH

CORRECTING THE FIGURES

We cannot let pass the claim made by Hhe Minister of Finance (the Hon. W. Nash) in his latest public address, that the statement that 'the increased income of the workers has been absorbed by increased prices "is not true," says a statement by the Associated Chambers of Commerce of New Zealand.

The Minister, in support of his claim, says the latest offiqial statistics available to him show that wage rates have increased by 23.3 per cent, since 1935, and retail prices by 12.5 per cent. To those persons unversed in the subject or wage-rate and cost of living statistics, it might appear, on this ■ statement, as if there is a net gain to wageearners of 10.8 per cent., but, as the Minister of Industries and Commerce has pointed out previously, "there appears to be a considerable amount of misunderstanding in the minds of a certain section of the public as to the relationship between increased prices and increased purchasing power. The Government Year Book (page 762) plainly sets out how such figures as the MinisteTof Finance has given have to <be submitted to a further pieceof arithmetic in order to arrive at the "real" value, or purchasing, power, of money wages, because the latter can buy fewer living necessaries owing to the higher prices of today. Therefore, the Minister of Finance stated only half the case. " . In calculating the purchasing power of present-day wage-rates, in accordance with the method set out in the Year Book, it is necessary, in order to arrive at the position of the great majority of industrial male wageearners, first to exclude the farm workers' group.- The reason for this is that the money wage"-rates now being paid to farm workers have been increased since 1935 by 56.7 per cent—an increase very much greater than has been made in the wage-rates of any other of the remaining industrial workers. Therefore, unless the farm workers are left out of the calculations, all the other industrial wageearners would be shown (on a combined groups basis) as having had a greater increase in' their wage-ratea than, in actual fact, they have had. The' Minister of Finance had not excluded farm workers,from the figures when he said that "wage rates have increased since 1935 by 23.3 per cent." The fact is that all those workers covered by the Minister's figures have not had between them (farm workers excluded) an increase in their money wage-rates of 23.3 per cent., so that their purchasing power is not as great as would appear. The correct position, on the basis of index numbers, is approximately as follows:— ) . Approximate purchasing power of adult male wage-earners (farm workers excluded).

Base for index numbers: 1926-30 = 1000. Year - * n , n 1931 ......,..:.. 1049 1932 108 * 1933 1109 1934 ..■ 1095 1935 I° Bo 1936 ..... ; .. HO S 1937 (December) '... 1087

These figures show that although industry has been loaded with the extra costs represented by the increases made in money wage-rates, all that has accrued to the full-time workers. concerned has been the negligible increase in their purchasing power of approximately .6 per cent, over 1935. The figures shbjw further that purchasing power,' far from being greater today than in previous years, was actually greater in 1933 by 2.02 per cent., in 1934 by .73 per cent., and in 1936 by 1.65 per cent. While wage increases themselves bring about increases in the ; cost of living, it is not the case, of course, that workers would be better off today if their wages had not been increased, because of other factors in the growth in the cost of living, namely (1) the cost of introducing' the shorter working week, (2), those normal increases in the prices of goods which have come about not as the result of any action by the Government, and (3) the heavier rates of taxation which are now operating. All these things cannot hope to march together without the cost of living rising at the same time and cancelling out purchasing power. Something has to go, and if existing wage levels and the shorter working week are to be maintained, then rates of taxation on industry and business must be brought down. Taxation being to no small extent written into the cost of living, reduced rates of taxation on business enterprise would in effect give a greater purchasing power to existing wage rates.