NATIONAL POOL

Evening Post, Volume CXXVII, Issue 61, 14 March 1939, Page 10

NATIONAL POOL

HOW IT IS SHARED

FIGURES ANALYSED

GROWING WAGES BILL

The view that it is time more attention was given to a better divisi.on of the product of industry, and with less restriction on private enterprise, is expressed by the Associated Chambers of Commerce in a statement issued yesterday. It is suggested that there should be a division which would encourage and not discourage the maximum production essential to the maintenance and improvement of the national standard of living. "Proof that the basis on which the value of total national production is being divided up between workers, Government and capital is getting out of balance is to be found in an analysis of official figures which are now available from the Government Statistician," says the statement. "The value of total production in New Zealand in 1937-38 was £135,600,000, which is a drop of £500,000, or .37 per cent., on the previous year. This £135,600,000 is the sum that was available for division between the parties that produced it, and the Government. How was it shared and how did the sharing compare with previous years? The following table shows how the first division was made between wages (the largest factor in the average cost of production) and capital:— 1935- 193G-' 1937----3(i. 37. 38. £ £ £ Mil- Mil- Millions, lions. lions. Value of production . 114.2 136.1 135.6 Wages and v salaries . 72.5 53.9 98.6 Balance for all other costs; interest, depreciation, profits, etc 41.7 50.2 37.0 "Expressed in percentages, the position is as follows:— Per Per Per cent. cent. cent. Wages and salaries .... 63.4 63.1 72.7 Balance 36.6 36.9 . 27.3 "Therefore, although the value of total production fell by 3.7 per cent, in 1937-38 over the previous year, total wage and salary payments increased by 9.6 per cent. In other words, out of a national pool smaller by £500,000, wages and salaries took. £12,700,000 more than they took the previous year, and left for other costs of national production a sum smaller by £13,200,000—a reduction of 26 per cent. —than was left the year before. GOVERNMENT'S INCREASING SHARE. "As for the share in the division of the produce of industry by the third party—Government—this cannot be set down so readily; total Government revenue from taxation cannot just be deducted from the 'balance for other costs,' because wages and salaries themselves pay taxes, both directly and indirectly, and because a large part of Government expenditure is on wages and salaries of employees of the State. Nevertheless, the increasing share taken by Government out of the product of industry is shown by expressing taxation as a percentage of the value of total production, as follows:— Taxation, national Taxes Value of and to In the production. local, income, £ £ £ p.c. s. d. 1910-11 52,800,000 6,538,000 12 2 5 1918-19 85,600,000 16,940,000 19% 311 1928-29 126,600,000 24,180,000 19 3 9% 1935-36 114,200,000 31,638,000 27% 5 -6Vz 1936-37 136,100,000 37,790,000 27% 5 6Y Z 1937-38 135,600,000 43,392,000* 32 6 5 "Includes local body taxation at the 1936-37 figure—the latest available. "Here again, out of a smaller pool, the third party in the sharing out has taken a larger apportionment, made still larger by an increase of 15 per cent, in the actual amount taken, representing a rise from 5s 6Jd in the £ of national production in 1936-37 to 6s 5d in the £, as compared with 2s 5d before the war, and 3s 9|d in 1928-29 —the peak year for value of production prior to 1936-37. Before leaving the shares of wages and Government, it is to be mentioned that the Government gives back a part of what it collects in the form of services, pensions, and allowances, which are really an addition to the wage fund of the nation, although not shown as such. REACTION OF CAPITAL. "Coming now to the share of capital —the only share to suffer a reduction— what does it have to provide? First, new capital for expansion; second, the reward for enterprise to encourage it; third, the means to provide for depreciation of wasting assets and those becoming obsolete. How has , capital reacted to the reduction of £13,200,000 in its share? The year 1938-39 would provide a more up-to-date index, but as that year is still current the figures for national production, wages, and taxation are not available. However, we know that national production values have received a serious setback through a decline in primary production, both in quantity and in value; exports for the first ten months of 1938-39 were valued at 44,000,000, which is a drop of £8,000,000, or 15 per cent., over the corresponding period of 1937-38. Notwithstanding, the Government budgeted for still more taxation than in 1937-38, while wage rates as at December 31 last had been increased since the end of 1937-38 by 3.1 per cent, over all industrial groups combined. These factors point to a still greater share in the product of industry by wages and taxation for 1938-39, and a still greater state of unbalance in the division with capital, leaving as the residue for other production costs, and for the profits of industry, a sum diminished still fur-

ther. One of the reasons why the Government introduced exchange control in December was the accelerated ■ flight of capital from the countrycapital which was afraid, and discouraged because it was receiving too small a share of the product of industry PINT OUT OF PINT POT. "The lesson which emerges is that more than a pint cannot be got out of a pint pot. Wages cannot, continue to take an increasing sum out of a j variable total. The standard of living depends not on wage rates or on costs, but on how much wealth is produced. In the same way, the question of the extent of the share of Government raises in an acute form the question of the taxable capacity of the country. As the rate of tax increases, so the incentive to produce decreases. The trouble is accentuated by the fact that so much expenditure by Government is unproductive. ' "From the above analysis it will be seen that it is time more attention was given to a better division of the product of industry, and with less restriction on private enterprise—a division which would encourage and not discourage the maximum production essential to the maintenance and improvement of the national standard of living."