The Wanganui Chronicle. THURSDAY, NOVEMBER 20, 1930. REDUCING PRODUCTION COSTS

Wanganui Chronicle, Volume 73, Issue 428, 20 November 1930, Page 6

The Wanganui Chronicle. THURSDAY, NOVEMBER 20, 1930. REDUCING PRODUCTION COSTS

costs of production is an essential action at the present moment, and the Hon. T. Shailer Weston, in his address to the Employers’ Federation yesterday, -did well to emphasise that fact. Indeed the harmonising of production costs with selling prices may be said to be the only problem before the country to-day.

While, however, it is an easy matter to stale the proposition it is another matter to advance proposals to solve it. It is puite true that the high wages paid in consequence of high prices cannot be sustained. But wages were not advanced because the value of primary products had advanced, but because the cost of living in New Zealand had gone up. To-day, the average money-wage of all the industrial groups combined

stand in advance of the pre-war wages by sixty per cent. The 1914 index number stood at 1000; for the June quarter of 1930 it stood at 1062. The three food groups index for the Dominion stands at 1514 as against the 1909-13 index of .1000. Rent, however. stands at 1856 and fuel and light at about the same ligtltjc. In so far as available index numbers reveal the position. therefore, the average wage rates about equal the increase in the cost of living. Possibly the 1914 basis was more favourable to the wage-earners. The all-gronps index number confirms this. Since 19’20 the tall registered by the all-groups combined index has been fairly consistent, totalling 107 points of decline to 1569 at August 3l> of this year. The relation of wages to the cost of living therefore, is as 1662 is to 156!). a disparity of 93 points only. In a period of rising prices wages lag behind price advances, and in the periml of declining prices wages Jag behind price falls. The lag in both instances in a market where a measure of free play allowed is from six to nine months. In New Zealand, however. Arbitration Court awards run for three years, and if the cost-of-living continues to go down, which appears to be most probable, then the lag of wage reductions behind the fall in prices must, extend for quite a considerable time beyond the free play period of about nine months.

For those who remain in employment the longer the period of readjustment is delayed the better will it suit them. But the advantages of sustaining comparatively high wage levels is more apparent than real. When wages are held at noneconomic. levels unemployment is a resultant and as unemployment has been made a national burden what is received in higher wages will be paid back again in taxation plus the wastage entailed by the transaction. The labour market, also remains over-supplied, which permits of low-grade employers acting- harshly, and employment is, in consequence, more precarious.

Mr Sha.iler Weston's advocacy of the rc-alignmenl of wages, therefore, is more in the interests of the workers as a whole, provided it does not entail a reduction in the standard of Jiving. and as it is proposed that the Arbitration Court should watch tliis point no fear should be entertained in this regard.

Wage reductions are, however, dependent upon the continuance in the fall of the cost of living. The immediate problem before the country is, therefore, how to effect reductions in the cost of living more speedily than they are likely to come about if matters are left to themselves? Obviously taxation reductions would help, especially reductions of the customs duties

on the essentials of life and tools of trade; cheaper bread would be of considerable advantage. Reduced Government expenditure would also help; economies in transport, could also be effected, but co-ordination of the various transport services does

not appear to be even in prospect yet. If the foregoing- proposals were adopted, their effect would permit of money-wages being reduced without harming real wages, and this reduction, added to those already brought about, would assist very much in reducing the wide disparity that exists between production costs and the selling prices ruling in the world to-day.