COMPLEX PROBLEM

Evening Star, Issue 21013, 29 January 1932, Page 11

COMPLEX PROBLEM

UNEMPLOYMENT POSITION ANALYSIS OF CAUSES An acute analysis of tho causes underlying the present unemployment problem in New Zealand is contained in the report of the Unemployment Board for 1930-31. It traces the course of trade and lays tho blame at the door of reduced export prices, which have not been offset by curtailed farm expenditure prices. Until prices rise, it is declared, the position will remain serious, “As a prelude to detailed consideration of the unemployment position in the dominion,” says the report, “attention may bo usefully directed to two broad divisions of the causes of unemployment in New Zealand at the present time;—(l) Maladjustment of the demand for and supply of labour due to causes inherent in the modern economic structure, and therefore of necessity a recurring and semi-permanent problem; (2) unemployment due to a sudden slackening in the demand for labour consequent on the acute depression through which New Zealand, in common with other countries, is passing at the present time. EMPLOYMENT IN INDUSTRY.

" Among the causes of unemployment falling under the first of these divisions, the seasonal ebb and flow of employment in the more important primary industries and in industries directly dependent thereon causes a recurrence of unemployment in the dominion in the winter months. The rapid development in. the technique of industry in recent years has 1)6611 another factor of a recurrent nature contributing to the unemploymentproblem. Although the volume of production in both the primary and secondary induslrics has increased very considerably during the past few years, the growth

of employment in these industries has not kept pace with the increased production. “A considerable expansion in industry would be normally concomitant with the resulting increase in the efficiency of labour, and this would absorb a large portion at least of the labour displaced by machinery and improved processes of manufacture. This has not, however, been the case—due, no doubt, partially to the depressing effect of a continued, though gradual, fall in wholesale prices, “ A disquieting feature of the present trade depression is that it follows a comparatively long period of decline in world prices,” continues the report, after discussing cyclical fluctuations in industry. “Although in New Zealand export prices recovered considerably in 1928, they fell away again in 1929 and collapsed in 1930, the general trend in export prices since 1925 (the peak year) being definitely downward. Wholesale prices in New Zealand have continuously (although slowly) receded since the year 1924. “The decrease in prices has fortunately been offset to a large extent by increases in production, a favourable balance of visible export trade having been recorded each successive year since 1920, with the single exception of the year 1926.’ It is doubtful, however, whether, even with the increased production, this favourable trade balance has been more than sufficient to meet out external interest obligations in any year, with the possible exception of 1928.” THE BALANCE OF TRADE. The average annual balance of visible exports over imports for the ten years 1921-1930 was £3,817,722, It was interesting to compare this figure with the corresponding average for, the prosperous years 1914-1919, when the average favourable trade balance was £9,936,987 per annum. The consequences of the rapid collapse in export prices were only too evident in the stagnation of business activity and the alarming increase in unemployment. While the prices received for our primary produce had fallen with remarkable suddenness, the costs of production had not as yet fallen to the same extent, with the result that our principal business —farming—had become relatively unprofitable. “ Comparison of tho farm expenditure index with the general export price index,” the report continues, “ shows the net effect of price movements on the economic position of the farmer since 1914. _ Between 1915 and 1919 the export price index was consistently higher than the farm expenditure index. This period was characterised by exceptionally favourable trade balances. During 1920, 1921, 1922, and 1923 the position was reversed—the export price index being consistently lower than the farm expenditure index. The recovery in export prices during 1924 brought the export price index to a slightly higher level than the expenditure index, while a further rise in export prices during 1925 increased the advantage in favour of the export index number to 120 points. Since the year 1926 the balance has been heavily against the export price index, the farm expenditure index being 178 points higher than the export price index in 1926, 208 points higher in 1927, 122 points in 1928, and 180 points higher than in 1929.” SUMMARY OF CONCLUSIONS. After an exhaustive review of trade conditions, the board draws draws the following conclusions: — (1) Our favourable balance of visible exports has fallen from £11,302,215 in 1928 to £1,914,778 in 1930. (2) The collapse in prices _ during 1930, superimposed upon a considerable decrease in 1929, has been responsible for this unsatisfactory state of affairs, (3) Costs of production of primary produce have not fallen appreciably. (4) Tho present level of the export prices index is considerably below that of the farm expenditure index. (5) While the long term of prices on the overseas markets would appear to be downward, the immediate future outlook points to a recovery from the present exceptionally low level. (G) Conditions of supply may affect the comparatively few commodities which make up our export trade more than monetary conditions, so that prices for these commodities may move to' a less or greater extent than the general price level. . (7) Wholesale prices in New Zealand have not fallen to the same extent as export prices, and retail prices have “ lagged ” still further behind.