FALL INEVITABLE.

Star (Christchurch), Volume XLIV, Issue 364, 4 March 1932, Page 7

FALL INEVITABLE.

Wages Considered by Economists. A FURTHER REDUCTION'. (Special to the “ Star.”) WELLINGTON, March 4. The opinion that a decline in wagcft, both money and real, is inevitable is expressed in the report of the Economic Committee, which was laid on the table of the House to-day. The report records that the community had suffered a loss of real income of from 10 to 15 per cent. This loss, it states, must be spread throughout the community if sound economic conditions are to be restored. To bring wages down in conformity with the fall in real income a reduction of a further 10 per cent would be necessary. According to the official index number, says the report, money wages were high during the period of prosperity, with a slight tendency to rise from 1923 to 1931, though when at their peak in 1930 wages were only 6.6 per cent higher than in 1914. From 1929 to September, 1931, money wages have fallen by 11.5 per cent compared with a fall in the cost of living index of 11 per cent. Thug, apart from the effect of the special unemployment levy on wages, real wages for workers in full employment are approximately the same as in 1929 despite the adjustment in money wages made by the Arbitration Court in 1931. Arguments Discussed.

“ An objection frequently made to a reduction in wages is that it decreases the spending power of the people and thus intensifies the depression,” says the report. “ This argument may have some force during the period of readjustment, but it cannot be true in the long run. Indeed, it may he shown that it is a fallacy. The spending power of the people as a whole depends upon the money value of the national income. If a reduction in wages helps to restore national it must ultimately increase real spending power. In the present circumstances of New Zealand, national income, both money and real, has fallen, and the former level of wages cannot be sustained for the whole people. Some will remain permanently out ef employment unless costs of production can be brought down sufficiently to expand the margin of production and re-employ workers at present displaced by the depression. The fall in wages must be considered along with the reduction in other incomes and in the cost of living. Moreover, the wage level bears a close relationship to unemployment. The maintenance of wages at uneconomic levels increases unemployment. Any increase in unemployment throws additional weight upon the Budget for unemployment relief. In the existing financial position it is important to avoid any increases in public expenditure if a sound Budget position is to be reached. It is therefore inevitable that a fall in wages will take place. The necessity for any subsequent adjustment could best be judged by the general progress of economic recovery and the reduction in unemployment Relax Restrictions. “ At the same time it is desirable to consider whether undue restrictions on industry cannot be removed in order that costs of production may n»i lowered. In some cases working conditions exert a more powerful influence in keeping up costs than does the level of money wages. At a time when a.l sections of the community are revising standards that were economically possible only in the period of high export prices and heavy' overseas borrowing, a revision of regulations governing working conditions in industry' is appropriate. It is not suggested thit free competition without any intermediary regulating authority should be restored. What is required is a relaxation of the rigid conditions that the community could afford in the davs of prosperity’, but cannot afford now’.”