The Wanganui Chronicle SATURDAY, JUNE 27, 1931. THE RESULTS OF WAGE REDUCTIONS

Wanganui Chronicle, Volume 74, Issue 150, 27 June 1931, Page 6

The Wanganui Chronicle SATURDAY, JUNE 27, 1931. THE RESULTS OF WAGE REDUCTIONS

W HE> < money wages are reduced, the immediate result is a reduction in real wages, but it starts a process of readjustment. In the first instance the money saved on the wage fund tends to be spent upon other work, and in that way the unemployed workers gain employment. This is some advantage, but it does not stop here; the lower wage rate tends also to bring about a reduction in the production costs of goods, which reduces the cost of living. In other words, the lower standard of money wages brings about a lower standard of living costs. The reductions in money wages, therefore, assist the inevitable process of readjustment. Sometimes price falls precede wage rate reductions and sometimes they follow it, but although the two processes work irregularly they nevertheless operate in sympathy with each other. The standard of living is said to be an equation of the rate of hourly pay multiplied by the number of hours worked, divided by the cost of goods purchased. Put in this way it is clear that any increase in the number of hours worked by the wage-earners will improve the general position, while the reduction in the price of goods will also increase the value of money wages whieh they receive. This process progressively aids unemployment and brings about a better condition of affairs. The foregoing, of course, presumes that there is no determined action on the part of the employers to force down wages to a level below whieh price reductions can bring about a compensation. If, for instances, wages are reduced by twenty per cent, when the national income has contracted by ten per cent, there would be an indication that the wage-earners were being called to bear a greater share of the burden of loss. The present conditions, however, do not indicate such an event having taken place. In some businesses, of course, there has been a considerable accumulation of profits over an extended period of years, but usually it will be found, on closer examination, .that these firms have invested the accumulated funds in plant and premises. In consequence of the fall in prices the improvements represented by the capital expenditure has to be written down in value because they cannot now produce the profit return of former years. Where the property in question is the subject of mortgage or of debenture charge the debenture holders frequently compel a liquidation. But whether there is anybody outside the concern or not to put the screw on to eliminate inflation, the loss of capital values is there all the same, and sooner or later a lower capitalisation comes about, with the result that the contribution to interest on capital is a reduced charge on industry. There is no possible means of equitably adjusting each individual ease, and so the process of adjustment must be left to the natural interplay of the factors. Wages, however, with some of the workers of the Dominion—but not the majority—are fixed by the Arbitration Court for lengthy periods of three years. During the last two years the decline in the national income has been heavy. For instance, the shrinkage in national income during the first four months of the current year, as compared with the same period of the year 1929, is fifty per cent, namely from £29,608,571 to £14,704,239. A reduction in wages of ten per cent., therefore, is prima facie no disproportionate burden to east upon the wage-earners as their contribution towards the process of the readjustment of values.