WAGE REDUCTIONS.

Waikato Times, Volume 109, Issue 18343, 1 June 1931, Page 3

WAGE REDUCTIONS.

ARBITRATION COURT DECISION.

ao PER CENT. CUT IN AWARDS AND AGREEMENTS.

TO COME IN FORCE NEXT WEEK

“LOWERING OF COSTS IMPERATIVE.”

(Special to Times.) WELLINGTON, Monday. Mr. Justice Frazer to-day delivered the Arbitration Court’s decision that, all rates of remuneration, including time and piece wages and overtime and other special payments, provided for in the awards, industrial agreements and apprenticeship orders now In force, shall, with the undernoted exceptions, be reduced by an amount equal to ten per centum thereof. , The order Is to operate and take effect on and from June 1, 1931, In the case of workers whose wages are calculated on a monthly basis, and on and from June 8, 1931, In all other cases. The order now made represents the decision of the majority of the Court, Mr W. Cecil Prime, sitting for the employers, being In general agreement with Mr Justice Frazer’s views, while Mr A. L. Montelth, the workers’ member, dissented. Mr Justice Frazer foreshadowed lower Interest rates In the “not far distant future.”

EXCEPTIONS MADE. POSITION OF CONTRACT WORKERS. The exceptions are:— The order shall not operate so as to reduce the rates of remuneration of any workers or classes of workers below the minimum rates fixed by any Aot of Parliament regulating the rates of remuneration of such workers or Masses of workers. It shall not affect the rates of remuneration provided in and by the Wellington Industrial District Flaxmills Employees’ Award, of June 28, 1927, and amended by an order of December 23, 1930.

ejed in conjunction with the move- • ment of exports and imports was the interest charges on the national and local body debt payable outside New Zealand. A sum of about £8,000,000 a year was-required for this purpose. During the past ten years the national debt increased’ by about £6,500,000 a year, which was, in effect, an addition to the national income of that amount, for it was an addition to the national spending power Now overseas borrowing had of necessity to be severely curtailed, and it was manifestly undesirable, if It could be avoided, to withdraw from the country’s financial resources, by Government borrowing, money required for industrial purposes. The result was that we must face the payment of interest charges on our externally domiciled debt out of a greatly diminished national income. New Zealand, in common with Australia, Argentina, and other primary producing countries, was suffering severely from the drop in the prices obtainable for her primary products in the unsheltered markets of the world. The whole world was suffering from the depression, .and the conditions' prevailing everywhere were naturally reflected in the markets upon which we depended to absorb our surplus production. There was little room, for doubting that the world had entered upon a. period of general deflation. We had been accustomed to ' alternating periods of rising and falling prices, but all the Indications pointed to a general reversion to. a permanently lower level of prices. Sooner or later, the prices of farm products and those of manufactures must equate to a common relative level, and it was necessary that this fact should be clearly recognised in a community such as ours, the greater part, by far, of whose income was derived from the sale abroad of its primary products. The sooner the adjustment was . over, the sooner we should return to normal conditions of prosperity, and the sooner would our Industries bo able to absorb a large percentage of those now out of employment. With a general reduction of our national income must come a general readjustment of the distribution of that income. Wages were, in the ultimate analysis, paid out of the proceeds of production, and the proceeds of production were barely two-thirds of what they were a year or two ago. The capital losses on representative industrial and commercial stocks during the past eighteen months had been from 20 to 50 per cent. In conse-quence-It was difficult to attract capital to commercial enterprises and the difficulty would continue until a readjustment was effected, or, at all events, was in sight. The Farmer’s Position. While it was true that a reduction in the rates of remuneration payable under awards and Industrial agreements would not materially benefit the farmer as a direct employer of labour,, it was equally true that he would derive a considerable indirect benefit from such a reduction. The position of the farmer, to-day was clearly indicated by the index figures of export prices, as compared with general farm costs and retail prices. The farmer’s purchasing power was reduced by more than a third below his pre-war purchasing power. His Income was actually less than It was In 1914, but he had to pay 50 per cent more for everything he bought. Excessive land values had been very largely written down in recent years. Interest rates, however, remained high. Neither Parliament nor the Court could bontrol interest rates. .They depended on the relative supply of and demand for loanable capital. Apart altogether, however, from the relief given to mortgagors by the legislation recently enacted for their benefit, mortgagees seemed generally to have realised that it was to their own interest to make arrangements with their mortgagors. Purchasing Power. The contention that a reduction in rates of remuneration would detrimentally affect internal trade, by lowering the purchasing power of tlie community, was so often put forward that it was necessary to examine it closely. It might be conceded that if wages generally were reduced from a standard that industry could reasonably afford to pay to a lower standard the contention would lie sound. If, however, the existing standard of money wages was too high to be maintained, in view of the general economic and financial conditions affecting trade anu industry, the cost of production checked consumption, and consequently checked furiher production; and (he check was followed by unemployment,, rationing of work, and reduced aggregate earnings of capital and labour. The maintenance of an tineconomically | high standard of money in such a case meant a reduced output and a reduced aggregate purchasing power, while a reduction of money wages to

It shall not altect the rates of remuneration payable to any apprentice employed under a contract, of 'apprenticeship under the Apprentices Act, 1923, which contract is subsisting at the date of the coming into operation of this order, nor shall it affect the rates of remuneration of any female apprentice apprenticed under any award or Industrial agreement, whose apprenticeship is ■ subsisting at the, date of the coming into operation of this order. The order shall not affect the rates of remuneration payable to workers employed on contract undertakings which are at the date of the coming into operation of this order being carried on by contractors if the awards or industrial agreements under which such workers are employed contain a provision that increased rates of remuneration granted thereby shall not apply in the case of contracts existing at the dates of the making or coming into force respectively of such awards or industrial agreements. The Court's Powers. The Court of Arbitration was empowered, by Part 11.- of the Finance Act, 1931, to amend by general order the provisions of awards, industrial agreements and apprenticeship orders, in so far as such provisions determined the rates of remuneration of workers. The term “rates of remuneration” included time and piece wages and overtime and any other special payments. The Court opened on May ,T2 and for seven days heard the representatives of the parties. The employers applied for a reduction of 20 per cent In all rates of remuneration, and the workers opposed any reduction.

MR FRAZER’S OPINION. THE ECONOMIC POSITION. IMPORTANCE OF OUR EXPORTS. FACING THE FACTS. In elaborating upon the Court’s decision, Mr Justice Frazer,,-after reviewing the general history of awards since 1914, said that the Finance Act of 1931, while re-enacting fmany of •the provisions. of the expired Act of 1921-22, omitted all direct reference to tho cost of living and a living wage. It directed the Court to take into account the economic and financial conditions affecting trade and industry in New Zealand, and all other considerations which it deemed relevant. The present Act imposed on the Court the duty of adjusting wages to economic possibilities, but nevertheless it required the Court in so doing, to have regard, as far as possible, to the maintenance of a reasonable standard of living of the workers. It was perfectly clear that an award or an Industrial agreement was not a contract, but merely a dooumont setting out the minimum terms and conditions upon which a contract of service might be entored Into. It was only whten an offer of employment had been made and accepted that a contract existed. It was to be noted that the amendment of rates of remuneration during the currency of awards and industrial agreements was the-subject of legislation in New Zealand as long ago as 1918, and had been so in Australia for several years, without any suggestion that an adjustment of rates involved a repudiation of contracts. Dominion Trade. The substantial nature of the reduction of the national income was indicated by the recorded values of imports and exports for (lie past three years. In two years the exports of the Dominion had dropped in value by over f 17.500,000. The total of exports and imports was under £78,000,000 for the year Just ended, while it averaged over £95,000,000 for the ten years from 1920 to 1929. New Zealand was dependent io a grealerj extent than most countries on her external trade, for she had to seek mar- | kets abroad for the bulk of her produce, and tiad to import a large portion of the manufactures she required. In the existing state of development of the Dominion, the volume of her external trade was, apart from special circumstances, an index of her prosperity. An important factor to be consid-

an economically justifiable standard stimulated consumption and, in its turn, production, and provided a greater purchasing power for the community in general. The reductions in award rates of wages in New Zealand necessitated by the depression of 1921-22, were followed within two years by an increase of 7345 in the number of workers employed in manufacturing industries and an increase of £896,065 in the amount of wages paid. Bondholders. The workers’ advocates had laid some stress on the position of the bondholder, and argued for equality of sacrifice. They did not suggest the adoption of a policy of repudiation, but it was difficult to see how the position of the bondholder could he assailed without repudiating, wholly or in part, the bond. As a community we had borrowed money in the world’s money market, and every class of the community had reaped a benefit from the expenditure of that money. Much of it had gone in providing employment and wages for our workers. Apart from the moral duty to honour our obligations, there was the certain knowledge that repudiation would deal a more serious blow to our national credit than any temporary gain would compensate for. The, bondholders in many cases were the workers themselves. There were now some Indications that Justified the expectation of lower Interest rates in the not far distant future. Cost of Living. Statistics showed that the cost of living index number fell from 1607 in 1929 to 1550 in the November quarter of 1930, to 1504 in the February quarter of 1931, and to 1491 in the month of March, 1931. Weekly money wages, for all adult male worlceis, stood at 1660 in the December quarter -of- 1930) The base in the case of both the cost of living statistics and the wages statistics was 1000 as at July, 1914. It appeared that a deduction of 8 per cent from the average rate Of wages computed on a weekly basis, would leave approximately the same purchasing power as in July, 1914, if the calculation was based on the combined cost of living index numbers for the November quarter of 1930 and the February quarter of 1931. If the March, 1931, cost of living index number was taken, a deduction of 10.2 per cent from the average rate of wages would leave the same-purchasing power as in July, 1914. Equality of Sacrifice. / It was true that award rates of wages lagged behind the rising cost of living during the period 1914 to 1920; but the award rates were generally regarded as true minima, and most workers received , considerably higher rates. Since 1927 the average purchasing power of wages had exceeded the relative level of 1914, and was today substantially in advance of It. Yet during the past tw r o years there had been a drastic contraction in capital values and profits. Those workers who were In steady employment were relatively in a better position than they occupied in 1914, while capital lost heavily and the position of the primary producers became critical. Companies were in many cases to-day paying reduced dividends or no dividends at all. It could not be seriously urged that a reduction of approximately 40 per cent in the value of our exports did not mean a very serious sacrifice to the primary producers and to the country as a whole. The burden of taxation, which has been increased and probably will be 'still further increased, fell principally on other classes of the community than. the workers. Even customs taxation had been saved to the workers, through their wages rates being adjusted more or less in accordance with retail prices. It was impossible to keep wages any longer at an uneconomic level. Standard of Living. When the disturbing concomitants of deflation had passed away, and the levels of wages and prices had adjusted thomselves, the standard of living should not necessarily be any lower than It had been In the past. A wise man did not capitalise on inflated values; that was, he did not embark on extensive operations until conditions became stable. It was probable that an adjustment of prices and wages to meet world conditions would give an impetus to industry, where at present there was a distinct hesitation to make any forward move. Thus purchasing power and real wages, as distinguished from nominal or money wages, would lend to increase. Once the necessity for an adjustment beoame apparent, temporising and falluro to realise the needs of the situation wore far more likely to have a lasting prejudicial effect on the standard of living of the community than was the adoption of prompt and efficient measures designed to bring about a -speedy economic readjustment. It, might be desirable to point, out ; that inflation was to some extent in- j evitable. By inflation, he did not mean a deliberate dilution of the eur- ( rency by means of manipulation of the' note issue, but (lie creation of an arti-j fleial purchasing power, ami the on-[ largcment of credits that formed tiic basis of tlu> currency. The recent announcement that the Bank of EngLityi

duced to 2J per cent was regarded by economists as a hopeful sign. A reduction in the bank rate was an indication that money was becoming easier, and in the course of a few months the reduction might be reflected in greater financial facilities being available to trade and industry, with a corresponding enhancement of the prices of our primary products. It was idle to 'hope for a recovery to the price levels of a few years ago, but an improvement to a standard approximately 25 per cent above that of 1909-1913 was not beyond the bounds of reasonable expectation. Whatever the new level might be, however, costs generally had to adjust themselves to it, and normal conditions of prosperity would return. Reduction Imperative. “I am convinced that it Is economically Impossible to maintain money wages at their present level. The substantial reduction In the national Income, and the generally lower level of world prices, call Imperatively for a reduction of all costs, Including wages,” said his Honour. The economic and financial conditions affecting trade and industry, taken alone, doubtless justified a reduction of 15 or 20 per cent In award rates, if we assumed that those rates were representative of the actual levels of wages now and eighteen months ago; but be thought that an allowance should be made for the admitted, though unascertained, drop that bad already taken place. A reduction of award rates by 20 per cent would inflict a serious hard.? nip on those workers whose rates had already been reduced to award levels, and more especially because such a reduction would involve a considerable reduction in the standard ol’ living below that indicated by tlie cost of living statistics. He had also, said his Honour, to consider the position of those workers who were paying off the purchase money of their homes. Though not all the houses were bought at the peak of prices, housing costs were fixed charges, and represented the largest single Item of domestic expenditure. In his opinion, it was undesirable that thrift should he discouraged, and he thought that a reduction of 20, or even 15 per cent would tend to produce that effect. lie had come to the conclusion, after weighing all the considerations involved, that a reduction of 10 per cent in all rates of remuneration fixed by awards and industrial agreements would give relief to producers and consumers, by lowering the costs of production and distribution, and would not inflict undue hardship on the workers. A smaller reduction would not give the necessary relief, and it might not he possible to pass It on.

MR PRIME’S VIEWPOINT. GREATER REDUCTION JUSTIFIED. Mr Prime in his finding said that it was undeniable that capital had suffered serious losses, and that the curtailment of the purchasing power of i exports had resulted in lessened commercial and business activity with, a consequent increase in unemployment to an extent never known In New Zealand before. There appeared to be only one way in which the position could be alleviated; that was by making our available resources, in other words our national income, go further. This could be done only by reducing the money rates of wages. Sacrifices must be made. Capital already had suffered; so also have those workers who were out of employment or who are working short time. Those who are In employment must shoulder their share of the burden. One of the relevant considerations which the Court should take into account in making an order for reduction in rates of wages, was the cost of living. Recent statistics showed a very considerable fall in the cost of living, particularly in the food groups. A reduction of 10 per cent in the level of general standard rates of wages, at present 66 per cent above 1914, I would reduce the level of standard rates to 49.4 per cent above 1914, or .3 per cent above the cost of living figure for March. An analysis of the cost of living figures showed that a substantial reduction in wages rates could be made without unduly affecting workers who owned their homes and who were paying fixed rales of interest, and in many cases making repayments of principal. As to tho position of those who paid rent, evidence was not wanting that a substantial fall had taken place recently In rents, and tho Indications were that a further fall would follow. Having regard to the economic and financial conditions affecting trade and industry in New Zealand, and taking into account the recent fall in the cost ol living, together with the fact that reductions in wages rates should cause the cost of living lo fall slill further, he was of the opinion that a reduction in wages rates of 121 per cent could Ijo made without inflicting hardship. The greater the reduction Hie more readily would Hie cost of commodities fan, ‘ substantial fail was required lo allow primary producers to purchase Hie commodities necessary lo production so Ilia I. production should uql only hut inerfiagn^.

Ilf this aim was attained, trade and Industry would recover to the benefit of workers generally, and of those who were at present unemployed In particular. While expressing the view that a reduction of 12i par cent was warranted, he nevertheless concurred with his Honour’s decision to make a reduction of 10 per cent. THE DISSENTING OPINION. CAUSE OF DEPRESSION. MALDISTRIBUTION OF INCOME. In dissenting from the opinion of Mr Justice Frazer and Mr Prime, Mr Monteith said the present world depression in his opinion was caused by the maldistribution of national income. Increased production had taken place, but increased production only became an advantage if it was reflected in a higher standard of living which meant a corresponding expanded market for goods supplied. Instead of this, wealth production had been absorbed by capital expenditure which was not justified, and the writing up of the -tfalue of existing capital. For the last century and a quarter all man’s efforts had been put Into increased production, and he had created a machinery age. But the social conscience in regard to the standard of living had not kept pace with his power to produce. Today as a result we had millions of unemployed, we had overstocked markets and idle plants. It was essential to maintain increased consumption at. the same ratio as production, otherwise a glut must result. Thus in the last century we had witnessed cycles of so-called over-production—-in reality under-consumption. The cycles happened periodically but at more frequent intervals, until today we saw unemployment a permanent factor, and overstocked markets likewise. In the past nations after wars had applied themselves to industry, and by greater output had been able to meet the increased interest hill on their national debt.

To-day, however, markets were restricted; In fact, all known markets were fully supplied, all nations were pursuing a policy of supplying their own Internal wants as far as possible, thereby cutting down imports and at the same time Increasing exports. In addition the policy of getting back to the gold standard had bad the effect of depreciated goods and appreciated money, so that all efforts to pay increased money Interest by increased production (goods depreciated) only added to the overstocked market and resulted in falling price levels, because the class that lived wholly on incomes derived from interest could not materially aid consumption, as they generally already hail lived a full life.

If the figure for females (who are ooming Into Industry In larger numbers) and the 3 per cent loss at the base of award wages were taken into consideration the figure would be considerably less, and show that, since 1927-8 the worker had slightly exceeded the 19J.4 standard but because of price levels lately suddenly falling and wage rates slightly Increasing, today the worker was in excess of 1914 by about 5 per cent, but he had a lot of lee-way to make up. Over-capitalisation. Economists were to-day agreed that overcapitalisation of industry was one of the greatest factors in industrial trouble of our time. Plants to-day were idle or working short time, and this meant that overhead costs could not be reduced, but lessoned output by working shorter time must mean increased cost per unit of production. The worker suffered by short time employment, the farmer could not get cheaper goods and the farmer’s market was restricted by reason of the -smaller purchasing power of the worker. It was clear that the groat increase In land values, mortgages, and increased interest rates were the cause of the farmers’ position. They suffered because of over-capitalisation; it must be so because the cost of manufacture of butter during recent years had decreased. Their relief was to be secured from mortgages and interest. This would assist them to again become possessed of a real purchasing power. An Important Difference. The lot of the general labourer was certainly that of a needy person. If he secured full time employment he received £4 Os Bd, but being on an hourly wage he suffered from broken time caused by wet weather and casual employment. The general labourer in the*average had been the base of wage rates in New Zealand, and the budget of average household expenditure had been made up on the following basis: Food, 34.13 per cent; clothing, 13.89 per cent; rent, 20.31 per cent; fuel and light, 5.22 per cent; and miscellaneous expenditure, 20.45 per cent. On a 10 per cent reduction he would have roughly the following amounts to spend: Food, £T 4s lid; clothing, 10s I Id; rent, 14s lOd; fuel and light, 3s I 9d; miscellaneous expenditure, 19s.] These figures were based on a full* week’s employment. The idea of the 10 to 20 per cent given by some Arbi-I (ration Courts in Australia was to give) the worker the full weekly rate, in 1 other words give some compensation] for the casualness of the employment. This was an important difference In j oriTcinis, ;a.i& jaads^a

in the lot of the general labourer here and elsewhere. c Mr Monteith did not think it reasonable to fix a wage less than the 1914 standard nor such a wage that ignored the hardship cast on the worker of increased casual employment.