WAGES AND PRICES I Pay rates have kept ahead of price rises

Press, 20 April 1979, Page 14

WAGES AND PRICES I Pay rates have kept ahead of price rises

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NORMAN MACBETH

(Mr Macbeth, an economic consultant, was commissioned by the New Zealand Employers' Federation to make a study of wage inflation and its implications for the economy. This is the first of four articles in which he reports his findings. A second article will appear tomorrow.)

The average wage in New Zealand is now about $155 a week, which is more than the country can afford. Wage rates are rising at the rate of about 18 per cent

per annum, which will increase the cost of living bynearly 12 per cent per annum. Higher costs will prejudice the country’s export industries and the bal-

(est.) Sources: Average weekly wage rate: Labour Department half-yearly surveys. Tax, take-home pay: calculated from tax tables.

ance ot payments, and lead to a devaluation of the currency. Unless radical changes are made to the system of wage-fixing the devaluation will have a negligible effect on the balance of payments.

Sweeping statements, these; but I believe they can be substantiated.

In this article the course of wages in the last 10 years is traced, and the effect of income tax on the average wage throughout this period is examined. The rising incidence of taxation is, I suggest, partly responsible for mounting wage demands — and for much of the current industrial unrest.

There are two measures of wage rates, or earnings, commonly in use in New Zealand: “nominal weekly wage rates,” calculated by the Department of Statistics from awards and industrial agreements within the jurisdiction of the Arbitration, Court, and rates prescribed' by other authorities (mainly for public servants); and the half-yearly survey carried out by the Department of Labour and Employment.

Each of these measures has its limitations and advantages, the main difference between the two being that nominal weekly wage

rates record minimum rates of pay while the half-yearly survey records actual rates. The figures in Table 1 (“Average earnings”) are taken from the half-yearly survey. They show average weekly earnings (male and female, State and private sectors) as recorded in successive surveys since April, 1969. The tax figures shown are for a married man supporting a wife and two children, with no other sources of taxable income. “Take-home” pay is the residual.

The most recent ”firm” figure in Table 1 is the October, 1978, figure — $140.65 a week. The private sector average was $135.90 and the State sector average $147.78, (This does not imply that workers earned more doing the same job for the State than in private industry. The higher average in the State sector probably reflects the higher proportion of more highly-paid women — e.g. school teachers —in the employ of the State). Male workers in private industry averaged $149.72 a week.

Earnings of most workers have been substantially increased since the October survey. Wage increases ranging from 7.5 per cent (forestry workers) to 30 to 35

per cent (aircraft workers) have been negotiated since then. Nearly half the increases — and most of the increases in the most recentlynegotiated awards and agreements — are in double figures. Making allowance for the number of workers covered by each award and agreement, the average increase in pay since October must have been of the order of 10 per cent. If these calculations are near the mark, the over-all average this April should be about $155 a week, made up of $l4B in the private sector and $167 in the State sector. “Nominal” wage rates and

average earnings (as revealed by the half-yearly survey) are compared in Table 2. For ready comparison, all figures in this table have been converted to a common base. The consumer price index, also included in the table, enables the three measures of wages and earnings listed to be compared with prices throughout the last 10 years. While wages or earnings, however measured, have kept ahead of prices, earnings after tax have shown the smallest increase in relation to prices. The next article in this series examines the implications of this for wage bargaining.

Sources: Nominal wage: Statistics Department (adult male employees, rates within the jurisdiction of all determining authorities). Average ermings: Table 1. Consumer Price Index: Statistics Department.

TABLE 1: AVERAGE EARNINGS Av. weekly Tax Takewage rate home $ c S c $ c 1969—Ap 41.90 3.98 37.92 Oct 42.78 4.15 38.63 1970—Ap 44.87 4.59 40.28 Oct 48.58 5.39 43.19 1971—Ap 53.61 7.12 46.49 Oct 57.05 7.39 49.66 1972—Ap 60.97 8.35 52.62 Oct 62.63 9.40 53.23 1973—Ap 67.89 10.77 57.12 Oct 71.82 11.97 59.85 1974—Ap 77.07 12.91 64.16 Oct 85.63 15.84 69.79 1975—Ap 91.61 17.98 73.63 Oct 95.66 17.23 78.43 1976—A p 102.84 19.76 83.08 Oct 109.75 17.86 91.89 1977—Ap 118.16 22.57 95.59 Oct 124.00 19.40 105.60 1978—Ap 132.18 21.11 111.07 Oct 140.65 20.48 120.17 1979—Ap 154.72 26.10 128.62

TABLE 2: WAGES AND PRICES March Nominal Average earnings: Consumer (nom. wage Price wage), April (March 1969 (April 1969 Index (March 1969 (av. -100) s -100) -100) earn's) Before After Tax Tax 1969 100 100 100 100 1970 107 107 106 105 1971 136 128 123 116 1972 151 146 139 125 1973 164 162 151 133 1974 185 184 169 147 1975 216 219 194 166 1976 239 245 219 194 1977 280 282 252 221 1978 321 315 293 253 1979 (est.) 376 369 339 279