Wages and Purchasing Power.

Press, Volume LXVIII, Issue 20488, 5 March 1932, Page 14

Wages and Purchasing Power.

The most useful of the secondary results of the Economic Committee's labours is an attack on the theory that wage-reductions lessen purchasing power. We have so often attacked this absurd notion ourselves that we should be tempted to call it a major result if there were a hope that the belief will now die. But that is not possible. It is so much easier to believe that a pound in our own pockets is worth more than two ten-shilling notes in the pockets of other people, and so many people will always find it profitable to say so, that the fallacy will survive all attempts to explode it utterly. But it is something that those who do wish for the truth have been told so plainly that purchasing power depends on national income, and that wage-cuts may actually increase that power by helping to raise the national income to its former level. In New Zealand at the present time the national income has fallen so sharply that our former spending power has disappeared; but none of what remains disappears when it is distributed differently or more widely. It does disappear, by the direct and indirect effects on production, if it is so distributed as to convert profits into losses. And we are not now saying, though the Committee does, that wages must come down. We are merely

pointing out that the level at which they may be maintained depends, first of all, on the amount available for distribution.