INCREASED COSTS

Manawatu Standard, Volume LIX, Issue 285, 2 November 1939, Page 3

INCREASED COSTS

FOOD AND CLOTHING. EFFECTIVE WAGES LESS. Since December, 1938, food prices in New Zealand have increased by 7 per cent., and all retail prices by 4.6 per cent. These figures are revealed in the cost of living indices in the latest Abstract of Statistics dealing with prices in August which also shows that the effective wage rate (purchasing power) lias declined by 3 per cent, in the eight months of this year which the Abstract covers. The present is the first year since the Labour Government came into power in 1935 that increased costs have caused a decline in the effective wage rate. A review of living costs shows that with the exception of 1920 and 1921, food prices to-day (groceries, dairy produce and meat), are the highest in the history of New Zealand, while the allretail index has been exceeded on seven occasions only in the last 20 years. The following table shows tile position in two of the most prosperous years of the 1920-30 period, a middepression year and post-depression years:—

1939 Aug-. 1091 995 1099 1104 Costs were Jow in 1935 following the depression. The immediate effect of the restoration of wage cuts and the increasing of wages was to create a substantial margin between wages and costs in favour of the purchaser. This was immediately reflected in retail business. During 1936, 1937, and 1938 the effective wage rate (purchasing power) was well in excess of costs. HOUSEHOLD BUDGET. The time-lag usually associated with the effective operation of costs, however, is now manifesting itself. Thus the 1939 figures show rapid increases in costs and a diminution in the effective wage rate. The margin between food costs and the nominal wage rate, according to the August Abstract of Statistics, is eight points only, tompared with 12 points in 1928 and 23 points in 1935. According to the Year Book, a household budget compiled in 1930 allocated expenditure as follows: Food, 29.52 per cent.; housing, 12.93 per cent.; clothing, drapery and footwear, 12.17 per cent.; fuel and lighting, 6.17 percent. ; miscellaneous, 29.77 per cent. The miscellaneous price index, al August 31, 1939, was 1081, compared with 9SO in 1935 and 1002 in 1928. Thus in two sections which absorb nearly GO per cent, of household expenditure, the food and the miscellaneous groups, costs have risen even more rapidly than wages. The remaining 40 per cent, of household expenditure (rents, clothing, drapery and footwear and fuel and light) have not as

yet advanced to the same extent. They combine to make the present retail index 995, which leaves a margin of 104 points in favour of the purchaser. This compares more than favourably with 1928 and 1935, but it represents a decline in purchasing power on the 1938 and 1937 figures, when the margins were 130 and 113 points respectively. NO ALLOWANCE FOR TAX. It has to be borne in mind that no deduction is made in these returns for the Social Security tax of Is in the £, previously 8d in the" £, for unemployment. No such tax existed in 1928 or 1929. The effective wage rate or purchasing power is calculated on gross earnings to-day as in 1928 and 1929. No allowance is made also for this wage tax in income tax assessments. Some indication of the position of the primary producer may be gained from the following table The Abstract of Statistics indices arc an approximate estimate of his income and costs:— Export Prices. WholePastoral and sale Dairy Produce. Prices.

These indices show a decline in the value of exports since 1928 of 411 points and an increase in costs of 140 points.

All Nominal Effective Food rota i 1 wage. wago group. prices. rale. rate. 1928 ... 1004 1006 1016 1010 1929 ... 1013 1004 1017 1013 1955 ... 732 795 833 1048 1935 ... 635 837 858 1025 1936 ... 870 864 950 1100 1937 ... 956 923 1036 1122 1933 ... 991 951 1081 1136

192S 1700 944 1929 1634 988 1933 867 904 1935 1072 937 1936 1223 946 1937 1423 1021 1933 1340 1036 1939 (Aucrust) ■ 1239 1084