LAND VALUES AND WAGES

New Zealand Herald, Volume LXXIV, Issue 22839, 21 September 1937, Page 13

LAND VALUES AND WAGES

Sir, —Mr. Johnstone says that "we are being treated to some confused thinking on this subject," a sentiment with which 1 heartily agree. Some of this confusion of thought exists in the mind of Mr. Johnstone himself and it arises primarily out of his failure to understand the meaning of economic words and terms. "Correct definition is the basis of all sound reasoning." Mr. Johnstone commences badly by assuming that "wages are the price paid tor labour," a popular but quite inadequate conception of the meaning of the term which in the science of political economy has a much broader significance than that. A similar misconception on the part of our political opportunists is responsible for the establishment and maintenance of the Arbitration Court and the absurd idea that tiie wages of labour can be "fixed." Happily this erroneous impression has been exploded by a wise pronouncement on the part of the Court itself which has shown that "the rates of wages in all occupations are not determined by the Court but by the price of land," a situation with which the Court points out it has no power to deal. The danger and the defect in Mr. Johnstone's definition of wages lies in the fact that generally speaking "the price paid for labour" is no more than a part of the real wages of labour, a term properly and permanently defined by Adam Smith when be wlote "The produce of labour constitutes the natural recompense or wages of labour.' Immediately following this statement and inseparably connected with it, the great economist proceeds to discuss in detail the predominating influence of the landowner upon wages, summing up the position "As soon as land becomes private property the landlord demands a share of almost all the produce which the labourer can either raise or collect from it. His rent makes the first deduction from the produce of labour employed upon the land." Ibis conclusion is confirmed without question by Kicardo's universally accepted Law of Rent which awards "the excess of the produce" over and above a bare living, earned by the joint activities of labour and capital, to the owner of land. TJn- j less there were a considerable difference between "the price paid for labour" and the actual product of labour it would be quite impossible for the idle and often absentee landlord, in the well-known phrase of Professor Jnorold Rogers, to "sleep but thrive or in the opinion of Adam Smith to reap where ho never sowed." W ill Mr. Johnstone denv that this discrepancy exists hetween what lie calls "the price paul for labour" and the real wages of labour and seeing that there arc only two funds, wages and rent, which participate in the distribution of the product (capital being a product of labour) what is subtracted from wages must go as rent to the owner of lapd. It is this fundamental economic # process which governs the numerous side-issues to which Mr. Johnstone refers. If space were available this could bo clearly and easily shown. «• Henry.