CAUTION URGED

Northern Advocate, 5 December 1935, Page 2

CAUTION URGED

EMPLOYERS LOOK AHEAD INCREASE OF WAGES [Soedal to “Northern Advocate. I WELLINGTON. This Day. The need for caution in increasing wages was stressed by Mr A. C. Mitchell, president of the New Zealand Federation of Employers in his annual address to the Federation this morning. The substantial rise in wool prices and the improvement m dairy produce prices would, if maintained, have far-reaching effects in promoting happier conditions. Signs were, however, not wanting of a general improvement in trading conditions. “In some industries the long succession of annuad trading losses have given place to small profits,” said Mr Mitchell, “but industry, as a whole, is not yet providing an adequate return on the capital invested.

“It is still necessary, therefore, to exercise the greatest care that the pendulum is not allowed to swing too far in the direction of wage increases until industry is in a position to bear increased cost without prejudice to the progress towards recovery which has been so long awaited.

“It has always been the policy of this Federation to recommend employers to pay the highest rates of wages which their particular industry can bear and it is a matter of genuine satisfaction that there has recently been a tendency toward higher wages in agreements arrived at in Conciliation Council.” A Danger. “There is some danger that assessors in the most sheltered industries, inspired by sentiment rather than by impartial analysis of economic cpnditions. may be tempted to yield to the popular idea that wage rates should be increased and go too far in that direction withouf*regard to the fact that nothing reacts on costs so quickly as wage increases, and that increased costs leading to higher prices cannot fail to retard industrial expansion and limit the amount of re-employment, which should come from increasing production. In that way wage increases, if carried too far, will react to the disadvantage of those whom they were desired to assist.

“It must be remembered that it is more in the interests of the community as a whole and of the workers themselves also to employ more workers rather than to increase unduly the wages of those already in employment. For years past the many industries have been working at a loss, and all industries —practically without exception —have been working without a reasonable return of their invested capital. Profits Necessary. “Wages can only be raised out of increased profits, and for that reason any industry which is still unable to show a profit is not in a position to raise wages,” said Mr Mitchell. “It is doubtful at this stage whether the country, as a whole, would be benefited by the distribution of the small amount of improved profit in the form of wage increases. Accretion of capital can only come from profits, and industry, as a whole, today, needs capital, not because plants are producing to capacity and plant extension is essential, but because new processes and new methods are necessary to keep in line with developments in overseas countries and keep our production costs down. These new methods and processes require capital expenditure.

“If improved profits are dissipated in the form of wages, it will mean that there is no capital accretion available for the improvement of industrial methods. The effect of this would be that our industries would be handicapped in the competition with imported goods and output would not expand as it should do as recovery progresses; further, employment would be curtailed, . and probably the total wages paid at the higher individual rate would be less than the total wages paid if rates are now stabilised at or about their present level. “There has been a tendency during recent years to speak of wage increases as a partial restoration of the ‘cuts.’ If the economic condition of the Dominion had been restored to its 1929 standard that phrase might be justified, but that is not the case. A new basic wage was forced upon us in 1931-32, and wage increases above that base should be correctly described.