WAGES AND COSTS

New Zealand Herald, Volume LXXV, Issue 22934, 12 January 1938, Page 15

WAGES AND COSTS

Sir, —"The wages we are discussing," says "Copper Coin," "are npt the rewards that go to all labour, but the wages that are paid by employers to employees." "Copper Coin" does not seem to be quite happy here. The statement is inconsistent with itself. Employers do not themselves actually pay wages. These payments are made from the earnings of industry by the production of goods. From tho sales of these goods to the public are tho rewards of industry paid. The employer merely disburses the rewards, and his own reward is among the disbursements. Other disbursements incidental to business are derived from the same source—public patronage. As the buying public consists mostly of employees it is obvious that any reduction of wages and salaries means a corresponding decline in business returns. Unemployment follows, and a general shrinkage of income is a sequence. This rather upsets "Copper Coin's" contention that "if wages are arbitrarily lowered, income is transferred from wage-earners to some other class." What income? All income is drawn from industry. An underpaid man is reduced in income. An unemployed man has no income. What income, then, is there to be transferred? Would "Copper Coin" say there was a transference of income when wages and salaries were arbitrarily lowered in 1931? There was not. There was an all-round shrinkage of income; as was inevitable. "Copper Coin's" phrase—"capital goods that constitute the armament of industry" is, I take it, merely a longish description of what may be set down in one word — materials. Well, what of materials? Materials really represent wages paid in industries engaged in turning raw materials into materials for use in constructive processes and articles of utility. Tho wherewithal to pay for these materials is drawn from the samo source —the purchasing power of tho public, and the source of purchasing power is wages —payment for work already done: any kind of work. Reduce wages and you reduce output (less work), because lower wages means a lessened demand for commodities on which wages are spent. J.C.