LETTERS TO JOHN SMITH

Taranaki Daily News, 29 August 1930, Page 7

LETTERS TO JOHN SMITH

ECONOMICS FOR ALL HOW TO GET HIGHER WAGES. COUNTRY MUST PRODUCE MORE. This is the eighth of a series of letters written for th<e Melbourne Herald by Professor L. F. Giblin, Ritchie Professor of Economics in the University of Melbourne. They are an attempt to tell plain men in plain woids why Australia has drifted into economic trouble and how she may recover Readers will have no difficulty in making the necessary mental adjustments to apply the lessons to New Zealand. VIII. Dear John,—We were trying to find out what the result would be if all the income of the country was equally divided —the income when it was at its highest —a year ago.. First we suppose the Governments take 40 millions by taxing to provide education and hospitals and roada < and so on. Now we may suppose the Governments to take the necessary savings, about 50 millions, to provide the new houses and factories and railways and machinery necessary every year to keep up all fully employed. When that was done there would not have been enough left to pay every worker the average wage earned in organised trades. And we are a lot poorer than we were a year ago. j. .. Sb I think it is clear that the wage in organised labour has .gone beyond that “limit” I talked about in earlier letters. Organised labour has only been able to get as high wages as it. has because a lot of unorganised I-ibour has been getting less. You have taken out of the unorganised labourer and the farmer just as much as he can. stand —rather more, because you aro killing him out. You can only raise wages any higher by taking it out of one another—by increased unemployment. That’s a mug’s game. - The sensible thing is to recognise that wage rates in organised labour have been rather above their fair share of the wealth produced in the country. With the fall in the wealth produced, they must come down. The only way to build them tip again and increase them is to make the country produce more wealth. Of course there are lots of things wrong in the present distribution of wealth that badly want, remedying. Plenty to do in that direction! But the important point here is that even if they were remedied, your wages as a unionist would not be any higher— ■ possibly a bit lower. If you want more wages the country must produce more wealth. Here and now, in Australia iri 1930, for you as a unionist, there is no other way. ■■■■ ■ : Now for some of the things you can do to make the country more productive, and so make higher wages possible. First, for the general things that concern you as a citizen and a man with a vote. The root idea I would like to see firmly in your head is that if it costs more to grow cr make a thing than it is worth, then it does not pay the country to make or produce it. And your wages are reduced by doing so. It seems obvious enough. No one willingly makes a lot or boots at a cost of £2O if he can only get £l9 for them. But we grow sugar at a cost of £2O a ton which we sell for, not £lO or £lB, but only £lO. And you are paying to make up the loss. It always costs the country something—and your wages suffer—when w;e make or grow things which are riot worth the cost of making or growing. But sometimes it may be worth while to pay the extra cost. It might, for example, be worth while to make ammunition here at a greater cost than it is worth for the sake of defence in time of war. It might be worth while to do the same thing temporarily to establish a new industry which in time will learn to make things as cheaply as other countries. It may be worth while to do so to tide over a depression in some industry, or at any rate to ease off the shock; as with wheat-growing at the present time. So it is not an easy question. In these cases there is always a benefit to be gained and a cost to pay—and the cost hinders your wages from rising. What you have to do is to size up the benefit and the cost and sec how they balance. The trouble is that the benefit is obvious and the people who gain make a great song about it; but the cost is spread thin over everyone, and not noticed. But it piles up for every bounty and aid to production and increase of the tariff till it does seriously affect our power to pay high wages.. So be suspicious of all proposals to help production in this way. Be sure that it is costing your wages something, and try to see whether it is worth it. In the case of sugar for export, you are helping .to pay to keep people at work sugar-growing a bonus of about £250 a year for each man occupied in any way in connection with the job. You might as well pen-v sion him and let him play cricket. Clearly it is not worth it. If it only cost about £2O a year per man, it might be worth it to keep the population. But in any case, in. the long run it coines out of your wages. There is a good deal to oe said on this subject, but I can’t take more time for it here. To-morrow I want to talk about what you can de as a unionist to make higher wages possible. —Yours, etc., L. F. GIBLIN, Richie Professor of Economics, University of Melbourne. July 16, 1930. "•