SHORTER HOURS

Otago Daily Times, Issue 21978, 13 June 1933, Page 16

SHORTER HOURS

THE EMPLOYERS’ VIEWPOINT RECOVERY THROUGH INFLATION On the subject of a shorter working week in industry, proposed as a means of combating unemployment, the Central Council of Employers of Australia has prepared a reply to the report published by the Trades Hall in December last. The memorandum makes a critical analysis of the assumptions inherent in the proposal to shorten working hours, and the broad conclusion is reached that some form ? of inflation, probably many forms as confidence in monetary management grows, is the only way to, achieve the objectives of recovery, not only for Australia, but for the rest of the. world. Discussing preliminary assumptions in the light of demand for goods and services, the memorandum states that the proposal to rduce the hours of labour, in so far as it reduces the actual volume of production, automatically also reduces the volume of demand. Experience of the last two .decades had shown that high wages act as a stimulus to efficiency in industry, and that rationalisation has proceeded furthest in those countries where wages were highest, or rather, where labour costs were highest. “ The main issue in the proposal of reduced hours is not the length of the working day at all. It is rather the increased cost of labour. Reduction of hours, accompanied by reduction of earnings, would benefit neither the employee since unless prices fell still further he would be no better off, nor industry, since the demand represented by total wages would be no greater whilst the cost of labour, and especially of supervision, would he increased. Shortening of hours of work would therefore have precisely the same effects in stimulating rationalisation as would raising wages or more correctly, increasing labour costs. Industry as a whole would acquire . no additional momentum in response to a rise in demand, and this constitutes the central failure of the proposal.” DEMAND THE, PIVOT. Countries which take upon themselves to apply a convention agreeing to reduce the hours of the working day would automatically accept a wage reduction as against competitive countries which did not conscientiously apply it. The observance of the convention could not be policed, and the difficulties from this viewpoint alone appear to be insuperable. Demand is the pjvot on which the whole industrial situation turns at the moment. Rationalism was tending to a marked contraction of the volume of labour employed in industry. The Australian industrial system was suffering from a shortage ! of spending power—both , on the consumer and “on the investor side. There was still too'small a demand for consumer goods at prices which would keep efficierft industries in operation. The drying up of the stream of capital seeking investment in Australia had left this country with a shortage of spending power, derived from ■ this source. Opportunities for profitable investment were rare. The community had a cost of non-production, i.e., sustenance, of which it relieved employers. It would in all probability be a more effective method of, sustenance to subsidise industry instead of individual workers. A shorter work week, to the extent that it tended to raise the costs of production, and hence to lift prices, would be a disguised form of inflation: •but it may not necessarily be the most effective means of achieving an inflationary, or. rather an anti-deflationary, end. Shortening of hours by leading to reduction of output would achieve higher prices rightly but at the expense of the total volume of production, and at a certain cost to the standard of living of the workers themselves.

PURCHASING POWER ESSENTIAL. It is suggested that the cost of nonproduction represented by that part of the’national income abstracted through taxes for unemployment relief should he devoted to maintaining the margin of profitability in industry by means of direct subsidies from the Unemployment Relief Fund. It was a compromise which would be removable after the crisis; it did the task which shorter hours was, to accomplish and it would stimulate demand by taking over some income from savings into the wages field. If more goods cannot be sold at .present prices, prices would have to fall to" the point at which more would be bought. To reduce wages and other 1 incomes would nifiely reduce purchasing power. Whatever temporary sacrifices were made/ by entrep? enours in order to hold the present position, community purchasing power must be maintained. Somehow or other additional demand has to be called into being, and the proposal to work shorter hours would not only fail to do this, but might even contract demand. “If the proposal to increase the wage fund is called disguised inflation, the answer is that Australia can afford a considerable measure of inflation, since prices are still falling, i.e., on net balance we are deflating. The fall in the note issue of £4,000,000 in the last statement of the Note Issue department is ascribed generally to the policy of wage reduction in 1032. The point is That in the public mind the fall in prices is now definitely linked with the fall in wages. The brake is now definitely dominating the accelerator,- and unless we wish the car to run back we must increase the acceleration or remove some of the deflationary braking power. MORE PLENTIFUL MONEY. “With one proviso we may state that any level of prices which results in underproduction is too high. The orthodox remedy is to reduce it until, the whole volume of available productive resources has been absorbed, i.e., including labour. Actually a better way of achieving this end may be not to go further with reduction of prices, but by making money more plentiful. There is in the world not under-consumption so much as a lack of balance of productive and consumptive power. Price reduction and supply should be cut short at the point where equilibrium "in the productive system is established, and in particular, when equilibrium between primary and secondary products is again established. “ Industry is handicapped by the fall in prices relative to the retarded fall in costs. Therefore if costs, and particularly labour costs, are kept stable, the Gordian knot is cut. This can be achieved by carefully-controlled acceleration through extension of . credit. The other prime necessity is to lighten what may be called the ‘rentier load’ on industry. This is proceeding satisfactorily enough through interest reduction, but the process must be speeded up. i “In present circumstances,” the statement concludes, “ it is no longer possible to ignore the serious loss of purchasing power which would be set up by further reductions in wage rates such as would be accomplished by a shorter working I week. It is now obvious that a general j fall in Vage rates such as has taken place j in Australia, even when it was accompanied by a corresponding fall in prices, has left demand only at depression level as far as wage incomes are concerned. The urgent necessity is to get back to a ! level above that of 1031, and there, is no j evidence to show that a shorter working day which would merely substitute underemployment for unemployment would change fundamentally the real causes of the industrial depression.”