BUILDING SUBSIDIES

Evening Star, Issue 21633, 31 January 1934, Page 2

BUILDING SUBSIDIES

DEFINITE STIMULATION TO INDUSTRY MINISTER ANSWERS CRITICS “ There appears at the present time to bo a fairly general demand for fuller and more detailed information in regard to the operations of the Unemployment Board’s No. 10 building subsidy scheme,” the Minister of Employment (Mr A, Hamilton) said yesterday. “ Already very full details have been supplied to the public as to the total value of works approved, of the anticipated cost to the board by way of subsidies, and of the value to the industry from an employment point of view as the work proceeds. The board cannot, nor has it any desire to, object to criticism being levelled against the practice of paying subsidies to the building industry. It is an unusual procedure, and any - thoughtful examination is helpful. It is not very clever criticism, however, to make the bare statement, as, though it were a fact that all buildings being subsidised would have gone on whether they had been subsidised or not, whilst to suggest that money expended in this direction would have been available for increased relief payments indicates very loose thinking. It is useful just now, in view of recent criticism levelled against scheme 10, to look back and observe the. unemployment position as it was at the early part of last year when the scheme was reintroduced. The building industry—the largest of our secondary industries from the point of view of employment—was practically at a standstill. In selecting the building industry for special consideration the Unemployment Board realised that practically no other industry offered the same need or facilities for stimulation by way of a subsidy. The percentage of the total money spent in wages both direct and . indirect is greater in the building industry 7 than in any other major industry in New Zealand. The total value of permits in the larger towns, where statistics are collected, for the month of_ April reached the zero figure of £76,000. This was the lowest monthly value of permits since the collection of building statistics was commenced in 1922, and is in sharp contrast to the monthly average value of permits issued between 1926 and 1929, which stood at £750,000, whilst on two occasions during that period the monthly totals exceeded £1,000,000. Helped, no doubt, by the collapse of the building industry the unemployed registration figures were increasing at an abnormal rate. It was freely and confidently anticipated by many of those now criticising the board for subsidising buildings that the unemployment figures would reach 100,000 before the winter came on.

“ The Unemployment Board had the position to face, and decided to reintroduce the No. 10 subsidy scheme. By making the scheme wider in its application than was the case when it was attempted the previous year, and by providing for a shorter working week on subsidised work, the board set out to stimulate the building industry, and, if at all possible, to counteract the abnormal increase in unemployment figures. “ It is a significant fact that when the scheme had operated for one month only the steady and abnormal rise which was taking place in unemployment figures was arrested. The following analysis of registration figures will enable ii proper appreciation of the effects of this scheme on the unemployment position : —The registration figures for the month of May, 1933. or the month preceding the operation of scheme 10, increased by 1,336 over the previous month, against a corresponding .increase for the same period in 1932 of 799. During the month of June, 1933, the first month of operation for scheme 10, the increase of registration figures was 356 only, corresponding with an increase of 1,495 in June, 1932. In July, with the scheme scarcely under way, the effects of the scheme were beginning to be fell. Whereaa in 1932 during the month of July the registrations at .labour bureaux increased by 495, in 1933 they decreased by 419. Taking another month for comparison when the scheme might be said to be properly under way—the month of October—the registrations decreased by 4,599, as against a decrease of 1,761 for the corresponding month of 1932; and, at the end of December. 1933, the figures of registered unemployed remaining on the books of the employment bureaux were less than at December 31, 1932, by 4,189, and despite the fact that the. 1933 year commenced with the registrations at 7,000 above those of January, 1932. “ It is strange that prominent among the critics of the building subsidy scheme we find many who were so confident that the registrations during the winter of 1933 would exceed 100.000. Wo might have expected them to give some credit to the No. 10 scheme, if for no other purpose than to excuse the non-fulfilment of their own prophecies. “To allege that the using of funds for subsidies under the No. 10 scheme has resulted in a necessity for cutting allocations under scheme No. 5 is not correct. It would appear more likely that had, it not been for the operation of the No. 10 scheme it mispit have been necessary further to reduce present allocations or to increase taxation. To give one illustration typical of others showing how scheme 10 operates should suffice to dispose of the idea ■that subsidies on buildings have reduced the money available for scheme 5. Take a city building, subsidised under the scheme which gave employment to forty men, all of whom were previously on relief under scheme 5. The cost of subsidy—approximate figures only—for these men was £SO per week ; the wages bill for the same men was round about £l5O per week. The weekly overall expenditure on this building, including the wages paid, averaged £450. Of this latter amount it is reliably estimated that, in addition to tlie direct wages paid, £2OO per week was paid in indirect wages. It is important to note here in this illustration, being an actual case, that the subsidy amounted to slightly less than would have been required to pay relief rates under scheme 5 to the same men. By expending the money in this way the forty men. instead of relief rates of pay, were in receipt of standard rates. In addition, they created employment for other workers at standard rates, and, more important still, all the men were employed in their normal undertakings. That illustration indicates clearly the advantages of the No. 10 scheme. The Unemployment Board is convinced that no other expenditure of the hoard’s funds has been so productive of advantages to the employment position as the expenditure under No. 10 scheme. It is not to he measured only by the reduction that lias taken place in registrations, hut. some account must he taken of the possible increase in registrations if the scheme had not been introduced. It is always

very difficult, when proposals have been given effect to, to got a measure of what the position would have been if those proposals had not been put into operation. “ The total value of applications approved is £5,494,001); the maximum subsidy on these works, assuming they are all gone on with and that all estimates as to cost prove reliable, would involve £500,000 in subsidies from the fund, hut direct and indirect employment would involve over £4,000,000 in wages, whilst the tax from these wages will amount to approximate!'’ £200,000. “ Such an arrangement as this, if at variance with usual economic practice, is well in keeping with the responsibility imposed on the hoard in section 17 of the Act, which sets out as a function of the hoard: ‘To take such steps as in accordance with this Act it considers necessary to promote the growth of primary and secondary industries in New Zealand So that an increasing number of workers will he required lor the efficient carrying on of such industries.’ “ Further, it should not ho assumed' that the whole of this increased building activity applied to large commer-

cial undertakings. Tho subsidy was made particularly attractive in reference to private dwellings of less than £650 total value. The effect of this is evidenced hv the fact that the November returns'' show 264 permits granted for private dwellings of a total value of £178,646. For each of the four months ended in November the permits for this class of building exceeded 200 and is in pleasing contrast to the position in Juno last wdicn the number issued was only forty-seven. ‘‘ It mav bo argued that people with money should build without subsidy. I could agree. The simple fact is that they were not doing so. This scheme has rendered liquid much capital that was for lack of confidence, frozen a mi'useless from a community point of view.