COST-OF-LIVING BONUS

Dominion, Volume 14, Issue 68, 14 December 1920, Page 8

COST-OF-LIVING BONUS

DECISION OF THE COURT \

AMOUNT OF BONUS TO BE 3s.

'• TRADE CONDITIONS REVIEWED

Tho question of tho amount the workers should' receive by way of bonus' to compensate them for the rise in tho cost of living ,dur' n g the lmlf-ycar ended September 30 last wns settled by a judgment fiiat Mr. Justice Stringer delivered in tho Court of Arbitration yesterday. His Honour's decision was that a bonus of 3s. should be awarded. ' Tho judgment was as follows:— "At tho end of October last the Court received a report from tho Government Statistician to tho effect that for tho half-year ended September SO. 1920, tl'.n cost of' living a? represented by retail costs of food, housing, fuel nnd light, nnd clothing had increased to an extent requiring an additional bonus of 24d. per hour, or 9s. per. week, to bo granted to adult male workers if their wages were to be adjusted in accordance with Mich increased cost of living., The Court thereupon, following its procedure in earlier adjustments, announced that, unless good cause 'was, shown to tho contrary, it purposed granting bonuses to workers, m coniormity <ith tho statistician's report, apd operating from November 1. 1 "Strong objection was Taised by emDlojera to tho granting of such bonuses, upon tho grounds: First, that tho computation of the Statistician was erroneous. and, second, that tho industrial and financial conditions of the Dominion-were such that it would he inequitable and unjust ,to grant any bonus whatever. It *ys then arrange! that the consideration of any applications for &e bonus should . be postponed until a test case was heard ?n Wellington, upon which selected representatives of the employers and workers respectively were to be heard. Vhis test case accordingly came on for hearing on November 29 and December 1 and 2, when after hearing the evidence adduced by tne parties, nnd very ablo and exhaustive addresses by the representatives of the employers and workers respec- £• ? i^ 9 ® onrt: res °rved its decision which has now to be announced. THE BASIC WAGE. "In April, 1919. tho Court, in dealing with applications for amendment of award? under the War Legislation and statute Law Amendment Act, 1918. pointed, out thnt in order to prevent Anomalies arising from a strict adherence to tho terms of the Act, it wan oil 0 /!Bar 3? slnft5 lnft wages of different ■'sporkerssporkers into line, to fix ,|definite periods m respect to which, readjustments- of wages should be made in accordance with tho increase in tho cost fW<■""? P erio <fc. ' The Court then fixed tho basic wages of tho different classes of workers, as follows •- Skilled workers, Is. 7Jd. per hour. Semi-sblled workers. Is. 4id. to Is. skiu) ° Ur ( a ' Cordin 2 to degree of Unskilled workers. Is. 33d. .per hour "It was stated by the Court that' these wages were substantial increases for tho different classes of workers' upon the wages prevailing immediately prior'to the war, and to some extent, although not .oily, compensated the workers for tlio increase in the cost of living up to the time of tho passing of the Act. The Court then further stated that to the said wagas would be added a bonus of 21 d. per hour, to compensate the- workers for the further increase in the cost of living up to -March 31, 1919, and that the bonus would bo readjusted as on September 3ft and March. 31 m each year (those periods having been selected by the Government statistician a? the most suitable for the purpose), the first adjustment to take Place as soon after September 30 followjng as was practicable.. It has been conlend ed by the -union representatives that tho bas'.s thus kid down by the Court operated, for certain statistical reasons which need not be mentioned," unfairly to the workers, but as we pointed out at the hearing the basis so laid down and acted upon-since must be treated as final and conclusive, as it would' be quite im. practicable' to reopen the question.

MISTAKE IN; COMPUTING BONUS. JMVith regard to. the contention of tlu> employers that the Statistician's computation of tho bonus, upon which we made, our announcement as before mentioned, wn» erroneous, it was shown clearly that, <|wing to an -unfortunate misunderstanding .which was explained at tho hearing the bonuses granted to workers for tho periods ending September, 1919, and 'ilarcb, 1920, lvere based, upon calculations made by the Acting-Government Statistician upon tho basis of monthly index figures instead of, as intended, bj the Court, tho moving average '' index figures for food, 'rent, fuel and' light, and clothing, and, further, that the bonus now under consideration had been arrived at on the same erroneous \basis. It is not disputed that if the computation of ilih bonuses had been made on the moving average index numbers as intended by the Court l the bonus for $ach period would have been as follows:—March-September, 1919, Jd. per hour, or 2s. per week. September, 1919-March, 1920, per hour, or ss. per weelr. March, 19M-Soptembor, 1920, 14d. per hour, or 7s. per wcok. It is evident, thereforo, that the correei bonus for tho last period is 75., and not 95., as previously announced, but since ■the total amount of the bonus over tho whole period should havo been 3j}d. per hour, or 15s. per week, and since 2\d. per hour, or 10s. per week, is already being paid, thff proper amount to bo paid for the last period is the difference of lid. per hour, or ss. per wcok. "This leads me to tho - all-important question as to whothor, in view of the financial and industrial conditions now prevailing in the Dominion, it is just! and equitable to grant any further bonus nt all. Prior to the year 1918 the majority of the Court had declined to increase wages to workers to the full extent necessary to meet the increased cost, of living, so far as it was caused by the war, on the ground that such increased cost of living was a-burden which ought to be borne -by the whole community, and that to relievo one class of its proper proportion ofUliat burden'meant Co inorease to. that extent the burden already being borne by the other classes of the community. In 1918 the War Legislation and Statute Law Amendment Act was passed l , and gave the Court power, which it lind not previously possessed, , to amend an award so far as it related to hours of work, or rates of remuneration of workers. The Court, interpreted tho stlatu'to to mean that, unless there wero shown to bo relevant considerations which made it inequitable to do bo, any inorease since the date of the award in the cost of living should 1 be met by correspondingly increased "wages. "PASSING IT ON." "The soundness of uhis interpretation <yf the statute was never challenged by tho employers, and the bonuses for the period's ending September, J919, and March. 1920, were granted in accordance with that interpretation. It is, I think, ih be regretted that on thi passing of flhis Act some attempt was not made to control tho increase in the price of commodities ' as a result of the increased wages paid to workers. It might, it seems to me, have been possible tto coordinate the functions of the Board of Trade with those of 'the Arbitration Court in such a way that no increase in the price of commodities, as a result of increased wages to tie workers engaged in the industry producing such commodities, should have been allowed l unless the Board of Trade wero first satisfied that the profits of the industry were &ot already sufficient to meet such increased wages, of, on tho event of it being thought proper to allow an increase in the price of the commodities alfected that such increase was not more than was fair and reasonable. In tho absence of such control tho conditions of trade during ni)d since the war have been such Vhat many, if not most of tho employers, irrespective of thoir former »,rofits, huvo been ab'.e to increase the prices of their commodities by the amount of the increased wages, plus a considerable profit thereon, with the result that, while ifheir workers were deprived to some extent of the benefit of their increased wages, the whole community has been put under contribution to enhance the profits—pos-

sibly already quite high enough-rof tho employer concerned. .In this way I feci satisfied that a good deal of what may bo called automatic profiteering has taken place.

"In dealing with the first applications under tho War Legislation and Statute Law Amendment Act we niado the following oosorvntions: 'It is certain that workers in other__in<lustne« -than tlioso now'being dealt with will in dun course make" application 'to tho Court . for amendment of their awards similar to thoso now imule, and a general Increase in tho wages of workers-may therefore b.i expected. It Is inevitable that the ■cffect of these increases will he reflected, nnd probably in a magnified form, In further increases in the cost of living if the other and nioro potent factors in raising the cost of living remain in full force and effect. Unless, therefore, the cost of the necjssarios of lifo is reduced as a result of tho cessation of wnr. or, failing thnt, unless tho price-controlling authorities, the Government and the Board of Trndef* are able to deviso and enforce some method of preventing further increases in the prices of such necessaries, tho Court will again and again bj asked to amond its awards, and increase wages in conformity with the ever increasing cost of living. It is obvious thnt the continual increase of wages of orgnnised workers through tho medium of the Court which results in- theso workers obtaining partial and often only temporary relief, largely at the expense of members nf the community with fixed incomes and of unorganised workers who, nre unable to claim th.> intervention of the Court, cannot continue indefinitely, and that sooner or later many industries may 'become unprofitable and cease operations, with the result that many worker? may b- 1 thrown out of employment. "To much the same effect TTis Honour Mr. President Brown, of th.-* South Australian Industrial Court. »said. in delivering a recent judgment: 'At a given in the histnrv of a particular society there is a limit to the nmount which should properly be awarded for wages. I USJ the term ~wngre here in a voir brond fphsr to includp not only , the living wage for unskilled labour, ivhich is partly ethical in the sense that it discards the value of tho work produce! by particular workevs. and is ba c ed on "normal and reasonable" needs, but also to include the superstructure ot wages or salaries for other classes, all of which of course affect the costs of production. Both wages and profits have to ho paid for out of the price paid by the consumer. If, whether by collective bargaining or by strikes, or jy judicial regulation, an atttnipt is made to • narrow unduly the margin of profit on capital, then there is likely to be a period of industrial dislocation, and every cUiss of the community is likely' to suffer. ■ And again later he says tliat the effect of awarding excessively high wages would be: "'(1) A period of dislocation involving much unemployment, and the ruin , of" many establishments. (21 Some industries not absolutely essential to tho community would die out, leaving their employees„to' swell' tho ranks of unemployment. (3) Many industries essential to the community would have t<j> be supported, either by increased tariff (in which case tho consumers pay directly), or bv increased taxation, in which ease the "general public contributes indirectly. and, in so far as taxation involves a levy on industry, it affects, or is likely to affect, the cost of production, and therefore the cost of commodities.' FINANCIAL AND INDUSTRIAL CONDITIONS. "The question I am now faced with is, whether tho 'financial and industrial conditions of the Dominion do not indicate cloavly that a 'point hns been reached to go beyond which would in all probability bring about, or at least precinitate, "the results before mentioned. We in this Dominion, in common with other British peoples, must puffer to some extent from the. inevitable aflermath of war. and it is instructive, therefore, to consider file conditions now prevailing ill Great Britain and the Dominions as an index of what may bo expected in New Zealand. In the London 'Times' of September 21 last the following article on thn economic position in England appeared:— ■ " 'The Outlook for Prices.—Each wN>k tile tale of diminishing trade activity is lengthened. Demand for cotton goods has decreased so appreciably during the past few mortths that, the Lancashire /otton industry last week held a conference to discuss a Tesort to short-time working, in order to keep as many .factories going as possible. Tho falling off in the foreign demand for cotton goods is largely due to the fall in- the price of silver, which has greatly reduced the purchasing power of the Far Kasterji markets, whil» Homo demand has decreased owing to a slower Tale of absorption. Short-time working has bpen in operation in the lyiot and shne. Jinen and hosiery trades for some time, nnd in the woollen industry manufacturers have not booked any substantial fresh orders for some months past. The motor industry which, a year ago, was enjoying an cxtmordinnrv degree of prosperity, is now in the depths of depression, and the prospect is one of almost unrelieved gloom. Foreign comoetition is beginning to assert itself in the iron and steel trade, which hitherto has had a rosy prospect before it. .

" 'Tt is fnshionable to blame the banko for the reaction in trad®.- On several occasions recently the closing ■ down ■ of works and diminished orders have been attributed, to the s'frineency of money. The public hns been led to infer from these statements thnt the banks have deliberately refrained from lending their customers money supposed to be available, whereas the truth is that-the. bankp have lent so much money that they cannot lend any more without increasing the strain, already excessive, -on their cash resources.

"The plain but-unpalatable truth of tho .situation Is vJiat prices of commodities have reached a level which the existing volumo of crfdit, or buying power, •> unable to maintain. . Prices must' fall. The credit position is fully extended. A further resort to inflation for iJie purpose of enlarging it would °nl.r aggravate adisease from which tho whole world is trying to recover. Proof of the fact 'that prices have outstripped buying power is to be found not only In the difficulty of obtaining fresh credit, but in j'he warehousing of high-priced goods which cannot be sold. If these goods were sold the credits which are immobilised in them would he released, and the banks would be able to lend the money again. Obviously, therefore the solution of tho present position is to ho found in a reducfion in prices, which will apply a fresh stimulus to demand.

" 'Labour, too, -will have to reckon with the march of economic prices, which :io theories will serve to dams buck. • Kenl wage.? will be determined J not by such phrases as "tho cost of living" or "stniidnrd of living." but by actual production. In short. Labour will have to recognise that it will be able to obtain only what it produces and no more. The eame principle applies to capital. High costs of production act ns a buffet to falling prices, and' give a bonus "io foreign competitors in the scramble for orders. Workers are suffering from a profound unrest, which for the most pnrt is founded upon a dangerous fallacy—inanely, that it is possible to get something for nothing. The most, pressing need of the present situation is the discovery of means to enlist the conscious cu-oper-ation of Labour in a combined eifort to increase output, to reduce costs of production, and to lower prices. Labour must realise thnt ii is not the money vnlue, but iho quantity of goods that determines (lie amount of employment' involved in the making of the goods. Tt will not avail Labour much to learn I!iat the vnlue of our foreign trade this year is higher than it has ever been, if the quantity of goods involves less employment. The consumers, liowovcr, would' bo ill-advised to anticipate a rapid fall in prices. Reduction must'be gradual, for any violent fall in prices would precipitate failures and destroy credit.'

PREDICTIONS FULFILLED. "Sinco the publication of this article indication.? of the accuracy of the forecast therein nmdo liavo come to hand. On. Decembor 1 it was cabled from Loudon, through tho United Press Association, that tho carpenters and joiners at Hie Clyde shipyards had struck against a reduction of wngos and bonus by 12s. per week, and thatemployers had stated that it was impossible to pay the current wages as shipbuilding 'costs were becoming prohibitive, in the same cablegram ft was stated that tie carpenters and joinors employed in the Belfast shipyards had accepted a reduction of

12s. per week. On the same date it was reported that unemployed workers in London had seized unoccupied municipal property and empty houses and that tlioy were being' supplied l>y tile public with rations of brond, bull;- beef, and coffee. On December 5 information was.cabled from that lol'ico hnd been served on 25.000 Wolsh tinplnto workers of the cessation'of work on December 2-t owing to .tile falling prices nnd demands,. with the object of "readjustmcrtt of wages, so as possibly to avert unemployment thereafter, nnd Mr. TJovd George, in a recent address to the Federation of British Industries, stated that there was no doubt that a time of serious depression was coming. In Canada the Government lias found it necessar.v to take measures to restrict the immigration of mechanics, artisans, and lnliourers in order (o allevlato the condition of unemployment now prevailing in thnt Dominion. On November 25 last jt wa; reported through the Press Association that Union officials in Sydney viewed with alarm the prospects for Christinas, because of the largo number of unomnloyed which it wns said wan Rrenter than had been known for thirty .yonrs, and on December 1 thn nmnlier of unemployed was estimated at 15.000, and. It wns stated that the Government were issuing food tickets to a thousand men daily. On December 1 a cablegram was received stnting that,, mvlng to sOncknoss of trade, there were unemployed in the Melbourne .metropolitan area, and that many fnctories were at a standstill, nnd later it was reported that'unemployment was rife _in many industries, notably bootmaking. tannery, confection- ] eiT. rubber, nnd some branches of the wool and clothing trades, and that the conditions were worse than they hnd been for twenty years. These examples, '•which might easily be multiplied, are indications of grave social and economic disturbances, and the same symptoms, although not yet of such an acute charactor, are, according to the evidence adduced at tho hearing, becoming mani'n„ ca ' an d- Nor. can I ignore the reflex action of any increase in tho wages of workers' generally upon thoso workers who are employed in the Public Service, for, as-> Mr. Philip Snowden, a leading Labour statesman, has said in his rccent work on 'Wages and Prices*! 'Where an increase in : wages in the case of railways and mines nnd public services necessitates an increase of prices or rates it has a disastrous effect upon tho largo body of consumers who are living on fixed incomes which cannot bo adjusted to the depreciated 'Value of the money.'

AMOUNT TO BE GRANTED. "Taking all these matters into consideration I have the gravest doubt* as to whether I nm justified in granting any further increase in wages at the present time. In view, however, of tho fact that tile bonus, whatever tho amount may be, although- payable in the future, is in respect of tho six months' ending- September last, I think the workers should bo granted some measure of' relief, which, however, for the reasons before-mention-ed, and in the view I take of tho circumstances, should be kept as low as il reasonably can, both in the interests of the community generally and of the workers themselves. The corrcct amount of tho additional bonus, calculated on our intended basis, is. as before stated, ss. per week, but taking into consideration the fact that from January 1 to October 31, 1920, the workers were receiving 2s. per week in excoss of the correct amount for that period, it is. 1 think, fair and reasonable that tho overpayment should lie adjusted by reducing any now bonus* by a similar amount for a period of six months, when a fresh adjustment of the bonus will bo made, and the restoration of the 2s. will be (riven offect to on such adjustment. Thjp would reduce the bonus for the current six months from ss. to 35., which is, in my opinion, as great as is warranted, having regard to the present financial and industrial outlook in New Zealand as disclosed bv tho evidence adduced nt the hearing,. The present minimum wage (including bonuses) for the lowest class of'male adult unskilled workers is -E4 Bs. per week for forty-eight hours, vMo'i, will now bo increased to £1 lis. That this is a fair living wage is, 1 tk'nlc, shown by the fact that in October lust the Board of Trado of New South AVeles (where the cast of living is not materially diflferont from that in New Zorlnnd) after full inquiry as to the lowest wago to be paid to Jin oHuU citizen cirrving average responsibility, fixed the an omit required as .£'i ss. per week, 14s, 2d, per day, Is. 9}d. per hour. THE INDEX FIGURES. "It must aleo be remembered that although wo have in the past used t.ho Government .Statistician's : calculations based on his index figures as a guide to tho asccr&innient of the increased cost of living, liavingi no other reliable, data to act upon, such calculations, as has been frequently pointed out, do not show irith absolute accuracy the changes in the actual cost of living for a particular class of the community, as for example the working- class. In August, 1916, Mr. Justice Heydon, in delivering' the judgment of himself and Mr. Justico Edmunds upon an inqniiy held bv them as to tlic cost' of living and the minimum wage, made tho following statement; One reason why wo find it impossible to accept, in abnormal limes, the variation in the purchasing power . of the sovereign, as ascertained by Mr. Knibbs, -as a oorrect indication of tho change in the cost of living, is that whereas the real cost of living is elastic, and; adapts itself to circunistancos, • Mr. Knibbs is compelled to. limit himself to a- fixed and rigid regimen. Having selected a, list of articles of general consunijition, :mid having, ascertained'. the average amount, of each consumed by the community generally in a given period, he watches' the rise and fall of their prices,, and learns thus, the amount of money required from, time to time to buy precisely those articles in precisely those quantities and precisely thoso proportions. If, far that purpose, more money is necessary in 1916 than was necessary in 1915, the sovereign is declared to have fallen in value; if ' loss, it is declared to have risen. We fully recognise the utility of this i>., vestigntion and' the value of its results, but it is clear that neither individuals nor classes do consume, month after month, and year after year, exactly the same articles- in exactly the same proportion. To what extent therefore and in what directions do they depart from the regimen? This, unfortunately, it is impossible to discover. IVs start, however, with the presumption, auiounl. ing to certainty (1) that the average of consumption, being tho average of the whole community, is not the average for the tpecial class, or part of the community with which we are concerned; and (2) that this class - will, with regard to the selected list of' articles set out, vary them, anil depart from them, according to circumstances, moro than will any other cla6s. Theso considerations were discussed in tho living wage judgment delivered on February 16, 1911. . The passages are too long to quote; but the conclusion there reached that tho ■ variance itf tho purchasing- power of tho sovereign, ns shown in .those tables, ,is not an accurate guide to tho actual rise or fall in the cost of living, particularly to the wage earning classes, has never, so far as we know, boen attacked, and authorities can be quoted which are in agreement with it.

In the Commonwealth Conciliation and Arbitration Court, in the Federated Clerks' case, Mr. Justice Powers, on March 24 last, expros.sed the same view, and after remarking that it was recognised tiiat tho increased cost of goods was caused by abnormal conditions, namely, the drought and tho war. quoted a lcttor from Mr. Knibbs, which it seems worth while to repeat, as it is the answer by'thd author himself of the tables as to tho purchasing power of tho sovereign to the porsons who would, make those tables a precise measure of the changes in the cost of living. He says: 'With respect to your question as to the variations of the regimen itself, and of the actual ■•ost of living as determined by using the price-index, it does give tho actual cost if the regimen is maintained. But I mn.y point, out that whon prices are abnormally high for a particular commodity, people diminish the use thereof, a qualifying fnctor which is often lost sight of. As prices become abnormal, so will any given regimen cease to represent actual usage; and to the exlout to which it differs from

actual usage, so will it fail to be a true indication of the actual cost of " living. It cannot be too clearly underwood that the price-index furnished in the 'Labour Bulletin' represents only the changing value of the sovereign 011 the supposition that thu original regimen, or 0110 sensibly equivalent thereto, is adhered to. To cite a concrete case: Suppose the price of butter became abnormally high, thrifty people would, of course, cease to use it in the same quantity, or they might even ccasc to use it altogether. Similarly, in regard to other commodities.' If clothing goes up in price, ordinary people are more careful of what they possess, and of new purchases. If meat goes up in price, less is used, and more of other foods oqually good and nutritious. "ERRING ON SIDE OF LIBERALITY." "The index tables for the Dominion aro prepared upon the same lines as • those of the Commonwealth of Australia, and the citations I have made are, therefore, equally applicable to our own. tables. In my opinion, therefore, the tables, without modification, arc not an accurate index of the actual increases in the cost of living to workers, and, so far as they err in this respect do so on the side of liberality.

' "In conclusion. I have to.6ay that I iiTone am responsi»te"7or this judgment, and the opinions expressed therein. Both of tlio other members of the Court disagree with my determination, which I nave not arrived at without much anxious consideration. Mr. Scott (employers'■ assessor) thinks_that the financial and industrial conditions of the Dominion are such that 110 bonus at all should be granted at "the present time, while Mr. /il'Cullough (employees' assessor), on the other hand, thinks that 110 sufficient grounds have been shown to justify the Court in refusing to the workers tho full s bonus of 7s. pot- week, and that, in any view of the case, the bonus should not be less than ss. per "If each member of the Court adhered to his own opinion, a deadlock would result, as a decision of the Court can only bo given by « majority of the members. As, however, we all agree that it is highly desirable, in the interests of employers, workers, ami the community Miierally that there should be a definite determination of the question raised in these proceedings, tho other members have withdrawn their objections, so that my decision may become that of tho Court." ■ Itis Honour observed, when ho had concluded the reading of tho judgment, that the particular before the Court when it heard argument regarding the bonus was that of the 'Wellington shop tailoresses. Threo shillings a week would ho the amount of the bonus for adult male workers, and there would 1)0 ri prbrortionnte reduction in the ease of women and boys.