WAGES PROFITS.

Hokitika Guardian, 29 July 1924, Page 4

WAGES PROFITS.

THE KORCESTHAT GOVERN Til KM. (By Sir Ernest Bonn). Tin' qui-sion ill the remuneration of labour ami tin- question of t!i<- making nf profits an- l;:ith so important, and a right understanding of them i- so essential to tin.* national prosperity, tliat we really must as a. people undergo a course of thoughtful sttldv and endeavour to pel our fundamentals light. w that oar views, when we have to express them, may at least hear some relation to the tones that govern both wages ami profits.

One of the earliest strike speeches iliit I remember hearing was in Birmingham, where a trade union leader was explaining to men on strike that me of the employing eompauies h-d m tually aei mutilated a reserve fund of half a million of money. That stat nment was naturally sufficient to make the wage earners who heard it feel the justice of their demand for an increase in wages. H:> far as 1 rci oilcct, the case of the strikers on that 0.-casion was II goad one. There was need for the wage, to be improved, hut it is fairly sale to sav that the real considerations underlying the prihlein were absent

from the minds of most ot the-e concerned. and tliat they were thinking along the lines of the trade union ontar. with hi- talk- of the half million of money, what e.nild he done with it. or how thev could get hold of it. A WRONG VIEW.

Most ol us. when thinking "! wages nr profits, vi-ualis* -oiuo extremely simple ime •generally a l-:i*-c that does not exi't- ami allow nur-elves to he carried away in one direction or another l.y our view of the i-|ilit.v of this set of sopjiesit iI ions circumstances. We picture something like* 111 i-: (tin* malt owns a seam of coal for which he has paid nothing, i.nd if he can sell the e *nl for £1 a ton In* gets somebody to dig it for him al Ids a ton. putting the i,liter It's in his pocket. No sili-li eas:* exists. I;llt it is good enough for the purposes of argument. 11 i s unite notions that if ihe owner of tin* coal can lie forced to raise the wages from Ills to Ins. wages are iiicr*>n* - cd at the expense ol profits, or euiiverselv. il the owner of the coal can lorn* down wages

from 10- to ns. he adds ns to the amount ol hi- profit, (to some siu-h simple reasoning as this the public, in its careless way. accepts the theory that if profits are good ihey are made at the expense of labour, or that the existence of good profits should he w go-id re-c-'-n for ilu re e-ing the i *•- 111il'leratioii ot lab.mr. and il lent lies the utterly wrong conclusion that pro fits go Up at the expense of wages, towages go tip tit the expense ot profits. To start at the beginning we must. I think, somehow he made to see that ■wages and profits are two entirely different things, and in fact hear very little relation one to the other. Wages are given in return tor work and ellort. whereas profits arise from a number o' causes, i ut chiefly as a nayment for the risk involved in the production p*e.cess. Wages are admittedly a lir-t charge Upon an undertaking; profits are the last. Wages come out of production, profits route out of exchange. In normal times, and in a normally prosperous: business, profits and v.ages will go up ami down together, tin's showing the absurdity ol the idea that t hero ianv (i-nlliet of intciT-l between th in. ct that one benefits :it I lie expense ol the other. ' An increase of wages means ail increase of cost at every stage of the process of production and marketing when selling possibilities are unknown, and. therefore, an increase ill tin* risk of the transaction, from which it follows that a bigger profit is necessary. The bigger the risk the bigger the inntil must be to induce someone to take the risk, and in a tree market, that allimperlani desideratum lor which we are all looking, the profit, will always lathe lowest ligure which will induce some one of all the i.mipetiug owner, of capital to come forward and take that risk. TilK IDKAI. STATE <>K A KLAIIPL The ideal Mate of alia if.- an ideal which is within our grasp--- when an industry will lie functioning properly and conferring increasing hetiehls upon everyhady. depends upon four essentials. which are always found in combination where real success is achieved: II) High wages, (•_>) high piolits, PH high production, i!) low prices. Il seem- at first sight to be paradoxi*.el that the halving ot th*- price ol au aitii-ie may dalible th* wage- and doubt,the prnhts. and yet eterybody knows tint that is done, and so il may seem al-o to be p.uadoxii-al that high profit*sli mill son’-etimes appear : id** by side with low wag*-' and liigli wages with low profits. |.el tis turn back for a lu-iiie.'Ul li the popular ease ol tie* owner of n seam ol coal, with his £1 n ton selling pri-e. I ’> a ton wage- and lib prolil. If we may j-. -ume that there i- only one owner, only one seam and onl*" on* workman, ami that the price of Cl is a fixture, it would be title (hat wages could I -.* made al tin* expense ot piolits or profits at the expense ol wages. The fact is that if our a-siim-ed owner can make 10s a ton on hi* seam of co.il everybody else who thinkthere may be coal upon bis properly will bu-y himself digging for it. paying wages without any profit', and that many other seams of coal will be di covered, all of which will not produce wages, but all of wliirli will not produce lit- a toil profit, ’flu- process will continue until somebody finds tliat biseam cannot be worked at a prolil el all, and at that stage the market I'm* lal niir in coal mining may be said t■; lie saturated. H ibis is the real -ituntioii. it i- obvious tliat any tampering with t!i*' lift pro lit of the fortunate owner of the good seam must discourage all other owners and prospective owners. and if the first winker does not raise wages so as to get o- of the first profit he inii-t throw out of work many of those win* are working less reiiiiinelative seams. If wages bail a claim on profits, piolits would coast' to function as the index which will guide initiative inli the right channels. If an industry is known In ho profitable thr- people turn their attention to it. put their sons into it. and invest their capital in it. and one of the ell eels nf all this i- that there in increased coni I'.et it ion for labour in that industry and wages gn up. Il is essential ll'oin the wages point of view that there should not only he profits, hut thai there should he good profits. So far from there being tiny antagonism lietween wages and profits, one dependUpon * '■•* ether. true right through. The Ford ear gives ns a standing il-lustration-tin illustration which has been almost- worn Imre, hut which remains true, and will lie found to he true in every case. Henry Ford has produced a product at a price that was never thought possible. He has been a powerful lever for the raising of wages. and in the course of a short twenty years is believed to he the richest man on earth. But his fortune has benefited everybody. He has put the world on wheels. IB* has increased wages, and through him we see the real answer to this conundrum of wages and profits. In his Life and Work he continually! protests that he never thinks about | profits, and I for one believe hint. He* never tires of telling us that the first thing in industry is in get your principle is right, and the first principle is that of service to the community. Ford has brought the opportunity to t itle in a ear w ithin the scop*.* of millions of his fellow creatures; he lias rendered service, ami in return his fellow creatures reward him and his work-

crs (and incidentally other workers in the same lilies of business) with unparalleled prulits and unprocedeiited wattes. Wealth, as 1 have previously observed. is an unlimited chilis'. There is any amount of it. We have only scratched the surfaee; we have merely experimented with our wealth-producing powers. If we will give up squabbling

amongst ourselves and will cease to think about ourselves and get to work in the .service of others, then—whether we like it or not, whether we want is or not —we shall secure both ever-in-

creasing wages and ever-increasing profits. In Europe, and in England in particular, we have fallen into the error of devoting our thoughts entirely to ourselves as producers, forgetting the purpose of work, employment and profits; looking upon a job ns an end ill itself; talking about our lights instead of our responsibilities. For these reasons we are very properly.'very nri-

turnllv. and—ns wo 'shall one day see—very obviously poinjj down bid.