PURCHASING POWER
LIVING COSTS v WAGES POSITION EXAMINED EFFECT OF TAXATION A good deal has been said over the last twelve months on the increased cost of living, and the extent to which the increased wages paid to workers have been affected as regards their real purchasing power, says a statement by the Associated Chambers of Commerce of New Zealand. So far, a fact which has not been brought out, is that the majority of wage-earners are not in such an advantageous position as they might believe. As the Minister of Industries and Commerce has properly pointed out, “money” wage rates are not the same thing as “effective” or “real” wages; what counts, is the purchasing power that is possessed by “money” wages. “Money” wages are affected by retail prices—that is, the cost of living—and, as the Minister has also stated, “retail price movements touch every member of the community.” If the cost of living increases at a faster rate than do wage rates, then those “money” wages, although larger than before, actually suffer a shrinkage in their “real” value, or purchasing power. Effect of Farm Wage Rates The Minister said in March of last year that “the increase in the cost of living has been more than offset by the wage and salary increases, and the people have still a substantial margin, which represents the difference between their increased wages and the increased cost of living.” The Minister put forward, in support, a table, based on the Government Statistician’s usual periodical statistics on wages and retail prices, to show that “effective” wage rates as at December, 1936, had increased by 11.9 per cent, over 1935—this percentage being the increased margin, as compared with 1935, left to the wage-earner after meeting the increases that had occurred in the cost of living (embracing groceries, dairy produce, meat, rent, fuel and light, clothing, drapery and footwear, and “miscellaneous” items). It has since been stated in Parliament that the “effective” wage rate increase to wage-earners as at December 31, 1937, was 7.8 per cent, as compared with 1935—the decline from 11.9 per cent, being due to the fact that the cost of living had increased at a faster rate than had “money” wage rates over the intervening period. These figures, based as they are on the official all-industrial-groups table, are quite correct as relating to the wage rate index for all the industrial groups combined, and we arc making no criticism of the Government Statistician or of the tables he publishes in this connection. However, when the published all-groups table of “money" wages is dissected, some further facts come to light. Analysis shows that the “effective” wage increases of 11.9 per cent, and 7.8 per cent, are due principally to the inflation of the all-groups-combined index by lhe disproportionate “money” wage rate ini creases to wage-earners engaged in ■farming pursuits. The index figures , for this industrial group show that -their “money” wages, as at December 131, 1937, had increased by 56.7 per I cent, over 1935, and their “effective” .'wages by 38.2 per cent. I These wage increases for farmI workers are considerably in advance ;of the increases taking place in the 'other industrial groups. The position l of these other groups combined would I be brought out more clearly if one ‘were temporarily to exclude the index figures for the farm workers' group, for the purpose of comparisons. However, such a separation of the published figures is not as simple a matter as might appear, complicated i processes having been employed v M c | (bvernment Statistician in compiling I the money-wage index figures for each ‘industrial group, and for all industrial j groups combined. We are not in possession of all the data from which the • Government Statistician computed his indexes, but we have made some calculations which arrive at a rough approximation of the index figures for
all groups (except farm workers) combined, and we have then employed the same formula as the Government Statistician in translating these into figures expressing “real” wages. The following is the position as closely as we are able to arrive at it:— “Effective” Wage Rates Approximate Increase Over 1935 ♦ Increase per cent, at Dec. 31, 19371 Including farm workers. Money wage rales 22.2 Retail prices 13.3 Effective wage rates 7.7 Excluding farm workers. Money Wage rates 14.1 Retail prices 13.3 Effective wage rates - .6 “Only Temporary Advantage” The table shows that the wages ol the great majority of industrial male workers, despite increases in their “money” rates since 1935, actually have an increase in “effective” value of less than one per cent., so that th< benefit of rising wage rates has beer almost cancelled out by the mon rapidly rising cost of living. As already stated, this increase of .6 pc/ cent, is only an approximation, and u not necessarily the true and accurate figure. It would be illuminating if the Government would have an authoritative table prepared giving the “real” wage increase over all indus trial groups, excluding farm workers. In any case, whatever the correct figure, there is no question that the "real’’ increase in the wages of thv great majority of industrial wage* earners over 1935 is considerably less than 7.8 per cent. This proves tnat the practice of increasing wages, and ol going on increasing them, has failed to give most wage-earner.; any advantage other than a temporary one, although at the same time loading industry wiu; higher costs. it is to be noted that lhe “effective ’ wage increase of approximately 6 pel cent applies only to wage-earners ir full-time employment at award rates of pay, and not. to the average of alt 1 wage-earners, inclusive of those unemployed or working short-time. Furthermore, lhe figures given take no account of the larger amount ■ wage-earners have to pay on their in- ‘ creased wages in employment-promo tion taxation and income taxation, 1 which further reduce their “effective’’ ! wages below the margin given. The increased amounts which companies have to pay in the heavier ! rates for income tax and land tax do not fall directly on the w'age-earner, ■ but they are. to a considerable extent, written into higher costs of living. It therefore becomes obvious how oppressive taxation sucn as exists in i New Zealand to-day Ls playing its part . in robbing wage-earners of any ef- : fective advantage from the increases in money wage-rates that are h cin s : affordcd them.
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Bibliographic details
Wanganui Chronicle, Volume 80, Issue 108, 10 May 1938, Page 11
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1,067PURCHASING POWER Wanganui Chronicle, Volume 80, Issue 108, 10 May 1938, Page 11
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