SHOULD WAGES BE REDUCED?

Wanganui Chronicle, Volume 74, Issue 111, 13 May 1931, Page 9

SHOULD WAGES BE REDUCED?

(Continued from previous page). j since .1925. The xalue of our primary I production for the current year has I fallen from the level of 1929 bx- not less I l han £30.000,009 or 34 per cent., ami [there has developed a great disparity lietween ou r export prices and our in i ternal prices. “A very large proportion of the total production of New Zealand comes directly from the land. The production figures for Hie 1928-29 year, page 926, Year Book 1931, shoxv that £84,000,000 out of a total of £126,000,000 was Irani this source. Of the total primary pro duction f or that year £56,000.000 worth or 66.6 per cent, was exported. It follows that the prices of our primary products depends entirely upon overseas markets. The remainder of our products are marketed within New Zealand. In some casus the market is entirely sheltered, in other cases partially sheltered. “The foundation of the whole structure of the trade and commerce of NewZealand is production from the land for export. The prosperity of all other industries depends upon the prosperity of the industries generally grouped together under the term “farming.’’ If the foundation remains firm the super structure is safe, but if anything happens to the foundation the superstructure is endangered Every period of low prices which the Dominion has experienced has given proof of this. The farming industries are first affected, the reduction of the farmers’ purchasing power reacts upon all .internal Indus tries and depression becomes general. Both the foundation and the superstructure of our industrial and commercial edifice are showing alarming weak nesses at present. “Exportable products are bringing prices actually less than the cost of production on the average farm, which means that the foundation of our structure, far from being capable of carrying the weight put upon it is barely self supporting. Remedial Measures. “Aluch has been done, and is being done, to strengthen the foundation by increasing the volume of farm production. The increase of 57 per cent, in volume of exports from 1913 to 1929 has already been referred to. The rate of increase must necessarily slacken off under exen the most favourable conditions and the ratio of cost to increased production will naturally increase as production approaches a maximum. Al. together apart from those factors the influence of the present low prices is unquestionably to reduce production. Firs*, class land may possibly pay to farm at present prices but second and ith’rd class land cannot pay and will go |ou‘ of production unless costs can be 1 reduced sufficiently to leave a margin ■ »■' p.clit. •‘Something has been done also towards lightening the superstructure :ty reducing costs. Private employers nave boon forced tc. reduce the salaries of executive officers and staffs and .ho Government has followed the. example as regards the Public Service. 11 There remains the necessity to adjust the labour costs of production and distribution by a reduction of wage rates. There has already been a rcdir.;ion of wages in the aggregate; the numbers of r(< istcred unemployed at* ford abundant proof ot that if the proof were needed other than that afforded by the fall in national income. A reduction in D.c sum tot-H of wages, however, has n<» effect in reducing cos s. In fact it ten ’.? 1e increase costs rath’r than otherwise. If a facto*v by reason of reduced denm.ul for its product has to reduce output end sho.’ en hands th’ 1 effect must bo to increase costs per unit of production. If a coasts! steamer has to run half empty where formerly she carried full cargo » the cost of freight po r ton carried is of necessity higher. Rut if T ho factory by a reduction of the wages rates .•’hie to produce more cheaply, and if transport charges, merchants’ charges, and retailers’ charges a-e pP capab’e of similar reduction the on .pct may !• 1 iraintainod, the full staff emp'oyod an i ‘he product made available to as wide a circle of consumers as before Woollen Manufactures. “The manufacture of woollen goods affords an example of the cumulative [effect of wages. Between the farm and | the consumer woollen goods are affect, cd by wages at every stage. Mustcrers, shearers, shed hands, carters, draw wages in the first stage; sorters, classers and storemen and carters in the second stage; factory employees in th-‘ third stage; carters, transport worker*, xvarehouseinen. and travellers in the fourth stage and retail shop assistants in the final stage. At every stag' 1 wages add to the cos' - o*’ every artic.** grown, manufactured or imported intc New Zealand for our use. “The. cumulative effect of a geuer.d wage reduction put into operation by every industry an J passed on to the consumer in all eases cannot fail to have that, effect upon costs anil prices which is so essential under present conditions. “There is still another point to bo made and upon which too much emphasis can hardly be placed, viz.. Wage rates under awards and industrial agreements are an immovable factor in the creation of total costs. The added xalue, to-day, is down to an unknown level. In many industries production has almost ceased, ai.d in all cases the xalue of products has fallen substantially. Wage rates, however, remain fixed and until they are adjusted there can he no reduction in wage costs at any stage of the compliiated processes of production and distribution. “If the economic equilibrium be not restored by adjusting the costs of com modifies to nietd. the reduced purchasing power of primary products tlie xol nine of our exports will decrease rapidly and inevitably, with this result, that our exports will be insufficient to pay for our imports, visible and invisible, and the exchange rate will be raised against us as has happened in Australia where at present the rate of exchange with England is quoted at 39 “The effect of that rate of exchange upon the purchasing power of the Australian worker should be considered. All commodities on the Australian market fall into one of other of these three classes —(I) Goods produced in Austin--1 lia. having a large exportable surplus; (2) Goods imported into Australia; (3j 1 Goods produced in Australia, and wholly consumed locally. “The price of the goods in the first class is 30 per cent higher because of the exchange than it v. ould be if ex change were at par. Thu British buyer knowing that Ils in England will provide a credit of 20s in Australia quotes a price that much higher than he would if the ex Tange were at pa The Australian price depends upon the British price and therefore, the Austin lian worker pays 30 per cent more fur

all goods of the first class. Obviously the price of all imported goods is 50 per cent higher because of the exchange •ind so the Australian ..orker pays 30 per cent on goods ;»f the second dais also. For goods of the third class the position is arguable I ut at least it is certain that the exchange rate is equivalent to a substantial increase in tariff and prices are kept up to some extent by that increase. The purchasing pow er of the Australian pound, in Australia as well as in London, is th< ;’cfore reduced to Ils. Later Income Figures. The reduction in the national income by reason of the fall in export prices has now been clearly shown. I have later figures than those published by the Statistics and will call evidence upon ’Lem. Tbex- bear out the calculations xxhici Imx’c l e< c pre sented and show the present position us regards wool, meat, butler and cheene. ‘‘l - ’ o'* 1 e\<‘r\' angle of (•xijiniirit on the same result is obtained as io the fall in national income. Upon that :'»]] is based the whole yf our case. ’J he country as a whole has Jess mo e/ »o spend. The smaller sum must, somehow or other, he made to go round. In 1913 rhe prices of to day were goo I | .i<os r.nd the country was prosperous. To dav the same price? arc disastrous because our costs are out of all proportion to export prices, but jixed wage rates are holding up costs. 'l'lm’ issue w plain, simple, unavoidable. Jf wage rates are not reduced the. market, for our secondary industries which depends upon the prosperity of the primary industries is incapable of expansion. On the contrary, it will further contract, because farm production will fall off on the inferior lands. There will then be an increase of unemployment and a consequent heavier tax upon those employed and upon industry as a whole. “Wage costs must be reduced and to permit of this money rates of wages must be adjusted. The question is by what amount is it necessary to amend wage rates to give tli«» desired effect. Australian Precedent. “ Australia has appreciated the nee essity for wages reductions as a means of reducing costs and since 1929 the basic rates have been reduced by 22 per cent, in Sydney, 24 per cent, in Melbourne. 24J per cent, in Brisbane, 25 per cent, in Adelaide and 22 per cent, in Perth. These figures include tho 10 per cent, awarded by the Commonwealth Court, of Arbitration. Jt follows therefore that the Australian basic wage rates hrve been reduced 10 per cent below the level indicated by the retail price index numbers usually referred to as the cost of living index figures. “1 can draw only one conclusion from all the facts of the situation and that is that a reduction of 20 pe r cent, in our money rates of wages is essential. Jf it be made the result will be a reduction of all internal costs, an improvement *jf- output, a renewal of confidence throughout our whole industrial field. “It has been stated that a reduction of money wages will mean a reduced purchasing power. That is a fallacy. Our national purchasing powe r is r<? duccd already and it will continue at its present volume as long as our costs are Kept up. An expansion of purchasing power may be secured either by an increased income or by a reduction in the cost of commodities. Increased income at present is not within our con trol. In so far as a wage reduction leads to a reduction of costs, purchasing power will be increased. A reduction of wage rates will mean a transfer of some spending power from the at present employed to the at present unemployed, and the latter will thereby acquire a purchasing power. As costs are brought down and turnoxer increased there will be an expansion of pur chasing power both in the aggregate and for the individual.’’