WAGE-CUT OPPOSED.

New Zealand Herald, Volume LXIX, Issue 21118, 27 February 1932, Page 14

WAGE-CUT OPPOSED.

PUBLIC SERVICE VIEWS.

ALTERNATIVES PROPOSED. ISSUE OF TREASURY NOTES. CONTROL OF CURRENCY. For the past few* weeks the executives Of the service organisations in the Post and Telegraph Department and the RailWay Department have been engaged upon a special survey of the general economic position, with its actual and probable future effects upon State servants. As a result of theso deliberations a number of proposals as alternatives to a wage-cutting policy was drafted for submission to the Government.

Every effort was made to havo these proposals brought under the notice of the Prime Minister, at first without success, but on Thursday morning Mr. Forbes met the president, Mr. W. F. Kent-Johnston, and the general secretary, Mr. J. H. McKenzie, of the Post and Telegraph Employees' Association, together with representatives of the Railway Tradesmen's Association, tho Amalgamated Society of Railway Servants and tho Locomotive Engineers, Firemen and Cleaners' Association, when the desired representations were made. It was also decided to forward to tho Special Economy Committee a written statement embodying the recommendations. A Helpful Spirit. The memorandum submitted to the Prime Minister was as follows:—" W e thank you for giving us this opportunity of placing our views before you, and, as we recognise that tho present financial crisis has added so heavily to your load of responsibility, we wish to assure you that wo come in a helpful and constructive spirit. Wo vill be as brief as possible, but it will clear the way for what follows to oxplain that, while we are particularly anxious to protect the interests of our thousands of members—who are State servants—we are fully alive to tho fact that the very general nature of the country's economic troubles makes it imperative that remedial action shall be on broad lines, calculated to relieve the general tension, and that special consideration of sectional interests would be unfair and impracticable. " In a sentence, our status as citizens is pre-eminent over our positions as State servants. In passing, however, we wish to refer to the tendency, frequently demonstrated by deputations to the Government and by w r av of published statements to specially singlo out public servants for attack, which, perhaps, indicates a fairly general opinion that normal rates of salary and conditions of State employment are comparatively so good that they should be the first to be reduced in the cause of economy. Such opinion is very ill-informed, but so far as the Government is concerned the case for public servants generally is so well known that recapitulation is unnecessary, and we will content ourselves by saying that, in consideration of the efficient and useful services they render, any further inroads on the economic position of public servants should be the last resort of a Government faced with difficulties in balancing its Budget. Restriction of Trade. We believe we are only stating a fact when we say that the steps taken last.- year to meet the financial situation, namely, salary and wage reductions, taxation increases and alteration of Arbitration Court awards, have failed to produce the results expected of them. Internal purchasing power has diminished to the extent of paralysing ■business. Imports have fallen away to the point where the loss in customs revenue almost counterbalances the Treasury gain from the wage -reductions, and the.ability of the payers of income tax dues to meet tho claims against them has been very substantially affected. ■ " In addition, local manufacturers, experiencing reduced demand for their products, have paid, off their staffs, thereby adding to the expense of unemployment relief, and also to the claims on local authorities for charitable aid. The restriction of trade in all directions has added thousands to the unemployed, and has accentuated the resultant hardships of poverty and its attendant evils. In addition to the effect on the adult population ♦he influence of unemployment and of blind alley occupations upon the future citizens of this country is a grave responsibility upon the Government. " Poverty, misery and hunger cannot steadily increase in any community without the grave risk being run of loosing social forces of an uncontrollable and even terrifying nature. The urge for food, combined with the " herd" instinct for the protection of weaker dependents, is the strongest passion of mankind, and a realisation of the present danger is becoming increasingly apparent among people in all walks of life. " The 6earch for a solution, or of anything tending to assist in that direction is engaging the attention of all thinking citizens, so it may bo said with certainty that.the soil was never more fertile for ! 'the reception of any ideas possessing reasonable merit which might be advocated as alternative to the Government's present policy. Methods of Relief. '" Our association, therefore, in their .desire to assist in the bringing about of a general economic improvement, at the same time easing the burden of the Government, direct the attention of the Government first, and then of all sections of the community, to the following points which are aimed, first, at affording the Government temporary relief without the hardships of wage reductions, and, secondly, at increasing production and industry, the stimulating of consumption combined with the regulation of currency and, within certain limits, tho stabilisation of internal levels:— . "(1) The issue of Treasury notes as legal tender to a limited extent not greater t,han the Budget deficit, or, preferably—- " (2) Control, of currency by a central bank or currency and exchange board having statutory instructions to use the recognised machinery of central banking in order to maintain our local price index within reasonable limits, such bank or board to be the only issuing authority in the Dominion. " (&) Mobilisation of gold. State monopoly of gold purchase and utilisation overseas of gold reserves. "74) A closer land settlement policy. "(5) Reduction of Government's interest bill by collection of income tax halfyearly. Treasury Note Issue. "'The dangers attendant upon the indiscriminate, issue of inconvertible notes are well recognised, but the safeguard of a definite limit removes the main objection. This system has worked successfully and would enable the Government to negotiate its deficit temporarily, with much less detriment to tho country than the continuance of its policy of last year. The placing of the iiotes upon the market at intervals would not cause inflation because the already restricted monetary circulation is inadequate—in short, it •would help to restore the previous monetary balance. " The restricted currency in actual circulation to-day is shown by the following tables: — Vslue of exports. Money in circulation. 1313 . £2l| millions £ls million note 3 plus gold coins. 1930 . £555 millions £6 million notes, no gold. /:• output. Wnge bill. 19U - .. £IGJ milh'ono £SJ millions. i 829 . s £O3 milliona £l7 millionß.

" The realisation of stable prices is the greatest necessity to-day in the interests of producers, businessmen and wage-earn-ers generally. This is endorsed by tho McMillan Report, President Hoover, the {lon. R. McKenna and numerous prominent authorities on banking and commerce. The disadvantages of ever-changing price levels and tho consequent effect on industry, commerce, farming and business of Parliament and Arbitration Court awards are obvious. The present index of stability is falsely taken as tho exchange rate instead of the ' all-groups' prico index. It is just as easy to control the mean pricelevel as to alter wages. " Currency control will ensure stable prices for primary products, stimulate industry and enable it to function without fear of depression and unemployment. Goods can bp received from overseas without affecting internal prices, internal financial burdens can be mpt in the same money unit as that in which they were incurred, while trade cycles of alternating booms and slumps would disappear. All currency being issued and controlled by a central bank or statutory board, the. only legal tender would be that issued by tho State, the community through the bank or board would bo enriched by all new issues, value being taken from no one's pound, and taxation would bo correspondingly reduced. Confidence would be restored and a return to internal prosperity obtained. " The Government's encouragement of the search for gold should be followed by the purchase under State monopoly of such gold and of gold ornaments and trinkets, the organised buying of which is already being undertaken for private profit. " The advantages accruing from the mobilisation of all free gold in tho country, by all fair means, is most obvious. Further, tho acquisition of and uso overseas by tho Government, of gold reserves held in New Zealand would be of immense benefit to the country. Closer Land Settlement.

A most practical suggestion is tho adoption of a policy of closer land settlement. We believe the real hope of our unemployed lies in a vigorous and practical policy of developing small holdings. Our population has increased by 33 per cent, since 1912, but our land holdings havo only increased by 16 per cent-., and most of this increase in holdings is in urban areas. Indeed, the acreago held shows this, for the 40.000.000 acres of 1912 has only increased to 43,000,000, or an increase of 7£ per cent. " Some means must be found whereby men can have access to pieces of land adequate to provide lor the support of themselves and their dependants. If {his were supplemented by a system to make available (say) acre 'holdings for men engaged in casual work in towns' and cities, a big step would be taken toward finding sustenance for the many families now dependent on public funds. ' " Even if these small holdings are let rent freo for a year or two, and the rest capitalised for later payment, the State stands to gain almost immediately by tho lessened calls upon its funds and immensely in the end bv building up the spirit of sturdy independence which comes from the tilling of the soil on one's own holding. Collection of Income Tax, " What the Government needs sorely at the present time is ready money, and we submit- that if inccrnc dues were accepted in half-yearly instalments this need would be met to a certain extent, while tho circulation of currency would also be speeded up to a considerable degree. We realise- that, hardships might accrue in some cases, but on the other hand, it would provide for the practical demonstration of patriotic help by those with tho means, of which Great Britain recently set a striking example. " We give precedence to these proposals, because in them lies the greatest good for the greatest number. In our opinion a return to higher and stabilised levels is imperative in the interests of tho country, and we are fully prepared in tho meantime to pay the higher prices resulting from an upward trend which will benefit all in the long run, if accompanied by an increase in the spending power of the people. " Only by these means, by the restoration of confidence, and the use of capital now locked up, can the present situation be improved, while on the contrary fur-' ther wage reductions will react with disastrous effects on almost every section of the community.

" Should these proposals not find favour with you, we submit alternatives which should more evenly spread the burden of sacrifice, still without recourso to further wage reductions: — " (6). The flotation of a fresh internal loan at a lower rate of interest to be popularised to the greatest extent by the Government.

" (7). A conversion loan and conversion of tax-free bonds to taxable bonds. " (8). Reduction of interest rates and rents by legislative enactment. Internal Loans. "With the resultant, saving in interest-, a conversion loan, and the flotation of an internal loan, are matters which should not present insuperable obstacles to a country with New Zealand's record in the Great War. Citizens who were prepared to give their sons should not. now withhold their savings in a. time r, f national stress, and steps should be, taken by the Government to popularise (heir in. ternal loans by material means as well as to seek tho aid of the press in appealing to the patriotism of citizens in meeting the enemy on the home-front, namely, unemployment. "If the Australian Commonwealth could arrange a satisfactory conversion loan, at tho same time enhancing that country's credit in the eyes of local and overseas investors, New Zealand should certainly be able to do likewise. Prominent newspapers in their leading articles hold the opinion that a compulsory conversion is tantamount to confiscation, nevertheless, they agree that receivers of interest should accept the same percentage income reduction, apart from taxation, as the wageearning community. "Although we are living in the midst of a superabundance of good things, yet tens of thousands of good and worthy citizens are denied access to a fair share of them by reason of unemployment- and restricted spending power, it is clear to us that a further reduction in the income of wago and salary workers is not the solution. Recent experience has shown that only too clearly. The wage and salary worker spends on his domestic needs nearly 100 per cent, of his earnings, and to reduce those earnings is, broadly speaking, a curtailment of the circulation of money. Rent and Interest Reduction.

"We, therefore, submit that to further reduce salaries and wages will not help the Government out of its dilemma —it will only make bad worse. Indeed, we believe a step in the other direction would" be the most'statesmanlike one to make. Either that, or steps which will result in the wage and salary earnings going further than they do at present-. In this connection tho rent and interest field is the one that opens up the greatest possibilities.

"While salary and wages are rapidly returning to the 1913-14 level, house rents aro disproportionately higher than in that year. A compulsory reduction of all rents by 20 per cent, would still leave the landlords <i decided advantage over the 1913-14 level, and would allow tenants to spend in other directions moneys that are now earmarked for rent purposes. It would also make it possible for the large per rentage, of trading people, who are now leading a "hand-to-mouth" trading existence to make ends meet. We seriously put this proposal forward for. by its adoption, we foresee a revival of trade, with consequential demands for New Zealandmade goods and commodities, leading to a call for the services of men now engaged on relief work. "If rent reductions were supplemented by compulsory reduction of all existing interest rates by, say, 1 per cent, on State, local body and mortgage loans domiciled in New Zealand, the relief would extend to those people who have been purchasing their own homes. We estimate that a reduction of 1 per cent, would bring relief to the whole community of approximately £5.000,000. The saving to the Treasury would be £1.165,000; to local bodies £363,000, the balance representing the reduction in mortgage interest.

As a very high proportion of these loans was arranged when the spending power of the interest involved was much lower than it is to-day, no great hardship would bo imposed on the holders of the securities in dealing with them in this way, especially as they have tho greater stake in balancing the Budget and the stabilising of values at the highest possiblo level. "It may bo 'unpalatable medicine,' but so were the wage reductions of a year ago, with the difference thrfc one should stimulate, where the other has been proved to react. While tho wago reductions had the. disadvantage of reducing the circulation of money, a. reduction of rents and interest rates would have negligible effect in this direction and would go a long way toward assisting the State and local bodies to bal once their annual accounts At least, it would be a more equitable way of assuring equality of sacrifice. "There is no virtue in bankrupting a largo percentage of (he community in an attempt to enable the State to meet its commitments. Tho State depends on the prosperity of all sections of the community, yet tho spectacle of a solvent State, consisting in the main of bankrupted individuals is one which will be realised if a change in policy is not forthcoming.

"It has been argued that because wageearners have been reduced but 10 per cent, and the farmers' income has dropped by, say, 40 per cent., no hardship and injustice would bo dono wage-earners by further reductions. It does not require much imagination to visualise the effect on the business man, the landlord, the rate and tax collector, and the reaction on tho farmer himself if such a course bo further pursued.

"No other State has been able to return to prosperity along tho road of deflation, and it is not to bo expected tlnjt New Zealand will be an cxcention. Recent, events both in Britain and America are in the direction of higher price levels. "The rejection by the Government of all or any of the suggestions made will not convince the public in general, and organised bodies in particular, that the Government's inaction and possiblo continuation of their past policy is for tho betterment of the country. Public opinion is being formulated on all sides in a steadily-growing recognition of tho need for currency control, and for different methods of improving the current economic position from those in practice. "We believe that the views we have taken the responsibility of putting forward are held by a large proportion of the community. From that standpoint alone they should prove useful —as an indication of what the people are thinking. Our own members think that their direct interests are best served by taking into account the interests of their fellow citizens, and it is from this angle we earnestly hope there is sufficient that is useful in what we have put forward."