SHARING THE POOL

Nelson Evening Mail, Volume LXXII, 14 March 1939, Page 6

SHARING THE POOL

WAGES, TAXES, PROFITS . NATIONAL PRODUCTION APPORTIONED DIVISION ANALYSED 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 J of official figures which are now available from the Government Statistician (says a statement by the Associated Chambers of Commerce of New Zealand). 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 £135.600,00 is the sum that was available for division between the parties that produced it, and the Government, How was it shared, and how c|. the sharing compare with previous years. The following table shows how the first division was made between wage? (the largest factor in the average cost of production) and capital:— 1935-6 1936-7 1037-6 £ £ £ m. m. m. Value of production 114.2 136.1 136.! Wages and salaries 72.5 85.9 98. t Balance for all other costs, interest, depreciation, profits. etc 41.7 50.2 37.( Expressed in percentages, the position is as follows: p.c. p.c. p.c Wages and salaries 63.4 63.1 72.1 Balance 36.6 36.9 27.5 Therefore, although the value ol total production fell by .37 per cent, ir 1937-38 over the previous year, total wage and salary payments increased b> 9.6 per cent. In other words, out of a national pool smaller by £500,000 wages and salaries took £12,700,00C more than they took the previous year and left for other costs of national production a sum smaller by £13,200,00( —a reduction of 26 per cent—than wai left the year before. As for the share in the division o: the product of industry by the thirc party—Government—this cannot be se 1 down so readily; total Governmen revenue from taxation cannot just tx deducted from the “balance for othei costs,” because wages and salarie: themselves pay taxes, both directly anc indirectly, and because a large part o. Government expenditure is on wage; and salaries of employees of the State Nevertheless, the increasing shar« taken by Goverment out of the produci of industry is shown by expressing taxation as a percentage of the value of total production, as follows: — § i j 8 i ~ o-g - 2 *3 . « 2 -g 8S g 5 > & HZ H £ £ £ p.c. s. d 1910-11 52.800.000 6.538.000 12 2 5 1918-19 85,600.000 16,940,000 19$ 3 11 1928-29 126,600.000 24.180,000 19 3 9] 1935- 114,200.000 31.638.000 27j 5 6] 1936- 136.100.000 37,790,000 27$ 5 6] 1937- 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 small 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 9sd 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 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. SHARE AND 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 received a serious set-back 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 193738, while wage-rates as at 3rd December 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 un-balance in the division with capital, leaving as the residue for other production costs, and for the profits of industry, a sum diminished still further. One of the reasons why the Government introduced exchange control in December was the accelerated flight of capital from the country—capital which was afraid, and discouraged because it was receiving too small a share of the product of industry. 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 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 wa? given to a better division of the pro- j

duct of industry, and with less restricI lion on private enterprise—a division which would encourage and not diaI courage the maximum production esi sential to the maintenance and imI provement of the national standard of [living.