DECISION GIVEN

Hokitika Guardian, 1 June 1931, Page 2

DECISION GIVEN

TO BE REDUCED

In the Court of Arbitration of New Zealand. * Northein, Taranaki, Wellington, Nel- , son, Marlborough, Westland, Canter,'ibnu'y and Otago arid' 'Southland dis-_ • tricts. , •' 1 ‘ " •" # 'in. the matter of the, Industrial Con- ' filiation and Arbitration Act, 1925, and The Finance’/Act, 1931; and in the matter of the : ’awards and indus- ! trial agreements for the time being in ‘/force in the Dominion; of New Zea„u Friday, the 29t%? day of May, 15)31. In pursuance and exorcise of the _ s . powers conferred on‘it by‘Paid II of ' The Finance Act, 1931, and of every other power in that behalf theretc enabling it, this Court, having had ~ regard to and taken into -consideration the several matters aud’ things as re quired by the said Act, doth hereby ,l order that the several awards, in • dustrial ’ agreements • (including ' dgieements filed witli a 'Clerk 'of pursuant to section 8 of The Labour Disputes. Investigation Act, .1913) aind : appiifnticeship orders .ma&e : bj the 'Court .under section 5 of The Ap prentices Act, 1923, j now in force, i. ■ the . Donijinipn of. New Zealand, jShal j be in manner following, fha is to' say: > -*■.-%! .” •• ■ . 1 F. ! ‘ All’-rat'es ofrtirtmuner'ation, ! "ir- £ - eluding time and piece wages and other specials payments, provided fo in the said awards, industrial agree meats and apprenticeship orders no\ in force, shall., ._save as hereinafter provided, be reduced by an aniounl equal to ten per centum thereof. 2. This order sfia.ll not operate s as to reduce the rates of remuneratioi of any workers or classes of worker below the minimum rates fixed b any Act of Parliament regulating th< rates of remuneration, Of such worb£ij» or classes of workers. 3. This order shall not affect th< Uates of remuneration provided in and by the Wellington Industrial Distric-Flax-mills Employees’ Award, dated s» the 28th day of June, 1927, and re- -■< ccwdeel * •-* im* ’ *BoiOki.i of -ci Awards^Anl» XXVII, p. 634, as amended by an order of this Court made on the 23rd day of December, 1930, and recorded fin , !Bo.ok, .of , XPI, Vi . ioio‘. t:; ; !J ■ ; ;:: ”; r % .4/ ! ‘ This confer • ' not i iaffeefc.. thegrates of .remuneration payable tif aiiy ftipprtntice employed under a contract apprenticeship under The Apprentice's Act, 1923, which contract is subsisting at the date of the coming into • foperntiou of this order, nor shall if ijiffect the -rates of remuneration of ; wfcfiy female apprentice apprenticed ESider any award ~? o r ” fient, wins© insisting at the datS of.) the into 5 •Ijjjperation of this o refer. iS}6. This order shall not affect the 3 "xHtes of remuneration payable to iai workers employed on contract nn.der--1! takings which are at the date ;of/the„ Vcoming 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 Aimaking or coming into force respect';‘fye!y of such! or. . industrial agreements. '' c x 6. 1 This order shall operate and take effect on and from the Ist day of. June, 1.931; in the ease, of workers •; whose wages are calculated on a monthly basis, and'on and from the I' ■ Bth day of June, 1931, in all other cases. ,JhK? ff-ci, '■ ? F. V. FRAZER. Vv y ~JUDGE. k ' ’- Memorandum: The Court of Ar- [ bitration is empowered, by Part II °t the,finance, k t&jwmaid by, genital proviiionstof'awards;*. industrial- agreements ship orders, in so far as such provisions determine the ’rate® of rep* numeration of workers. The term “rates of remuoeratiqnlL is defined as including time and piece wages and overtime and any other special payments. The Court,,is. requirod, before ' making any'* gorier order under the ■Act, to afford such opportunity as it thinks proper to representatives of the part'es concerned to be heard by •the Court with -respect to the. amount by which the rates cf remuneration 'Mould 1 be varied. -■ g In accordance with the provisions of .the Act, the Court, appointed, the 1 " §2bli May, 1931, as the da%pn > which hit would hear the representatives of the parties. The employers applied for a reduction of 20 per cent, in all rates of remuneration,/ andjlie- workers opposed any reduction.'' s - v '. .Vi Before commencing an analysis of tlie evidence and argument submitted, it is desirable that I should make a ‘ brief survey of the legislation, l relating to tlie adjustment of rates of renuiwages during the currency of an | and industrial agreements. Before.; the World War of-1914, tlie Court! had no power, to'increase or rbducej v.yages during tlie currency of an award except with the consent of all; parties. Between 1914 and 1918 the Court, when making new awards, added a “war bonus” to the- rates of remuneration prescribed by awards,

BY ARBITRATION COURT

AWARDS OF THE COURT

BY 10 PER CENT

and Sjhat bonus remained unaltered until fresh awards were made. In i9lB, the War Legislation and Statute Law Amendment Act was passed, section 18 of which empowered the Court to amend the provisions of current awards and industrial agreements in so -far as they related to hours of employment and rates of remuneration. In exercising the powers conferred upon it by that Act, the Court was required to take into consideration ,an_y alteration since the- date of the award or industrial agreement in the conditions affecting the industry concerned, and ally increase since the date of the award ol- industrial agreement in the cost of living affecting the workers concerned'; and.if, having regard to these and to all other relevant considerations, the Court was iof the opinion that it was just and equitable to make an adjustment, it Was empowered to do so, Under this ’pgislation the. Court • from • time to time increased the rates of remunernrtion payable under awards, and industrial agreements, until; at the -ieak of November, 1920, ' the', general 'minimum rate 1 for unskilled workers, which liud averaged' Is, FJct p°r hour hi 1914. rose, to Is lOjd.pcr hour, and the general minimum rate for skilled workers, which had been Is 4 Id and Is fid per hour in 1914, -rose to 2s 3?d >er hour. It is to be noted that the legislation empowered the Court to take into consideration such increases in the- 00-t of living as hid taken place since the dates of the respective awards and industrial agreements. The Court, however, increased the standard rates from time to time, independently of the cost-of-livin' T bonuses, and by *this means -relieved the workers of a .larger part of the bill’d on of the increased cost of living. In 1920, The War Legislation and Statute Law Amendment Act of 1918’ mas amended, and the following T>revision was substituted for subsections 3 and 4 of section 18: “TM .on the, .Court. bv this section are discretionary, and may be exercised only if the Court, after taking into consideration any alteration since the date of the award . drf’agraemlot. jnTlh/e fcond’itions -.affect-- ' ing/tbe!industry*or industries to winch, such award or agreement relates, and any increase; bv decrease since tlm date of the award in the cost of living affecting the winkers or any class ot' worker! engaged in any such indusLy or industries, and all other relevant considerations, is satisfied (a) “That it is just and equitable tp-rthey.employers a.nd, the , iijpi-kers.,, in isupil;-industry or 'industries Hhafcj |se>. ! be ; / aiidl '(.h) That - the economic c°ntinuance of siicli industiT or industries will not be unduly imperilled by the effect of any such amendment on, the cost of, production r f ’ > jf f \ f | , “Provided, however, that any award or agreement made under this clause . shall provide for, a „ fair livingt for' the Workers engaged in the -industry or industries concerned.” Under this provision, the Court stabilised wages for eighteen months, (November, 1920 to April, 1922), by setting off an''increase in March, 1921, against ’a reduction in September, 1921. In 1922, The Industrial C«n-j ciliation and Arbitration Amendment Act, 1921-22, was passed, which re- j pealed tho earlier legislation, but | still empowered- the Court to amend current ; awakcls ‘ and industrial ; agreements. , Section 9 (2) of this Apt provided that th'e Court should, in exercising its powers of amendment, have -regard to any increase or decrease .in. the cost of living 'since the half year ended on. 30th September, 1920 (the ~pepiod .„pn ..-tlie ~§tatistig>a.L ..returns , Qt . W.Kich: iHe stabil'|atipft referred to was based); , 'aiiii'Ho the econom%;and-finan-cial conditions affecting trade and industry in New Zealand, and all other relevant considerations; and the Court was empowered to make, by general "order, such increase or reduction hi the rates of renjunerntion payable under the provisions of awards and iiidustninl agraementK as it (thought 'just and equitable, having regard to a fair standard of living. In May, 1922, a considerable fall in the- cost of living having taken place since the bass period, the Court made a general order reducing wages by lfd per hour, the exact amount indicated by the movement in the cost of, living statisticsaSTn Nov.ejviber, ,1922, a further fall in the cost of living had taken plice, and th t > Court, made a further order reducing wages by :}d P er hour. The general . minimum rate for un-pl-UJed workers thus became Is 8 J cl per hour, and that for skilled workers 2s 1 3d per hour. In April 1923, a further reduction of id pur hour ,wes h found to lie justified by tlie cost living statistics, but the Court dei cided not to make an order enforcing it. In October, a slight increase j in tlie cost of living figures reduced j the decrease represented by id per , hour to -}d per hour, and again the i Court decided not to make an order. On 31st December, 1923, the special legislation expired, and was not i’eenaetpd. From that time until the passing of The Finance Act, 1931, the

Court had no power to amend rates \ of -remuneration during the currency ’of awards and industrial agreements, without the consent of all parties thereto. The Court, however, in the exercise of its general wage-fixing jurisdiction, added Id per hour to its rates when making new awards after 1923; and in September, 1925, it issued a pronouncement in which it indicated its intention of adding a further Id per hour to its rates. During the whole period from 1923 to 1929 the cost of living remained almost (stationary at a point slightly over 60 per cent, above the 191-1 level. The general minimum rates since tlie Court’s ,pronouncement of 1925 became effective have been, and still are, Is l()d per hour for unskilled workers and 2s 3d per hour for skilled workers, the former rate being approxi- j mately 60 per cent, above the eo-r----responding average rate for 1914. j The Finance Act, 1931, while re-; enacting many of the provisions of 1 tlie -expired Act of -1921-22, omits all direct reference to the cost of living ai:d -a living wage. It directs the Court to take into account, the eeon- 1 omic and financial conditions affecting trade and industry in New Zen-! land, .lin'd all -other considerations, which it deems relevant, and em- | powers tlie Court to make such Order ' as it thinks just and equitable, f J .- :. 4 i 1 interpret the Act as miming the. economic and fiiiahciai conditions af-1 footing ti'ade it n cl industry the- para- j moil hi 'consideration, though of course; any Wage-fixing tribunal must hece-s- ■ snrily have regard, t-o such consider a* i tlolls -as the cost of living and a liv-1 iug wafijo. They are- relevant c(onsiuerntions, but aro not over-riding i considerations, as was the case under j the expired legislation. The present Act imposes on the Court the duty | of adjusting .wades to economic possibilities; hut nevertheless it requires}) the Court in so doing, to have regal'd, as far as possible, to the maintenance of a reasonable standard of living of tbe workers. It is from this point of' view that I approach the- case r*i’e- j seiited to the Court for an adjustment, of current rates of remuneration. j A preliminary issue—that Tl'e Fin-', a nee Act, in so far as it empowered, the Court to adjust the rates of remuneration prescribed by awards and industrial agreements, involved a repudiation of contracts—was argued at some length. The issue was really irrelevant to tlie present proceedings, for a Court is not entitled to go behind the Act that it is required to interpret und administer. However, it is perfectly clear that an award or an industrial agreement is not n contract, but merely a document setting out the minimum, terms and conditions upon which a contract of service may he entered into. I lie Court of Appeal has described the making of an award as the exercise by the ’ CoiirFbf : a delegated legislative power, •and it has defined ail award its an extension of a statute. It is only when an offer of employment has been made and accepted that ft contract exists, It is further to be the amendment of nates of remuneration during the currency of awards industrial agreements was the subject of legislation, in New Zealand as long ago as 1918, and lias been so in Australia. forj several years, without any that ain ,adjustment of -‘rates involved ft repudiation of contracts. The Employers’ advocate,-Mr Bishop, stressed the falling off in the national income during the last two years, and the position of the primary producer. The witnesses called by him gave detailed evidence in support of his arguments. ' The substanial nature of tlie reduction of the national income is indicated by the recorded values of imports and exports for the past three years, as shown in the table appended:— Year ended Imports. Exports. 31st March £ £ 1929 45,105,865 57,154,343 1930 49,167,914 49,045,817 1931' 38,300.807 39,527,784 In two years the exports of the Dominion have dropped in value by over £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 fjor the ten years from 1920 to 1929. New Zealand is dependent to’a greater extent than most countries on her external trade, for she must seek markets abroad for the bulk of her produce, and must import a large portion of the manufactures she requires. In the existing state of development of the Dominion, the volume ot external trade is, apart from special circumstances, an index of her prosperity. An important factor to be considered in conjunction with the movement ot exports and imports is the interest charges on the national and local body debt payable outside New Zealand. A sum of about £8,000,000 a year is 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. i of course, overseas borrowing must of necessity lie severely curtailed, and it is manifestly undesirable, if it can lie avoided, to withdraw from the country’s financial resources, by Government borrowing, money required for industrial purposes. The result is that we must face the payment of interest charges on our externally domiciled debt out of a greatly diminished national income. Tlie figures quoted are eloquent, and no comment is requred to increase their impressiveness. New Zealand, in common with Australia, the Argentine Republic mat other primary producing countries, is suffering severely irorn the drop in

the prices obtainable for her primary products in the unsheltered markets of the world. The whole world is sm-. fering from tlie depression, and the conditions prevailing everywhere are naturally reflected in the markets upon which we depend to absorb our surplus production. There is little room tor doubting that the world lias entered upon a period of general deflation. We have been accustomed to alternating periods of rising and falling prices, but all the indications point to a general reversion to a permanently lower level of prices. J have, on a former occasion quoted a remark ot Dr. Kenunerer, Professor of Economics at Princeton University, U.S.A., to the effect that inflation, like alcohol taken in excess produces a temporary exhilaration and 4i sense of well-being, but is sooner or later followed by deflation—a pamOu process, but inevitable—which may lie likened to the alcoholic’s “morning after the night before.” If, as I think, we are now passing through a period o general deflation, it is necessary to consider all possible means for easing the painful process and for getting over its effects as quickly as possible. It is impossible to evade it. and palliatives are futile. Our priinary products—wool, butter, cheese, meat, fli’x —have boon the first to meet the blow, which lias fallen with unexpected suddenness and severity. Sooner or iatei tile prices of farm products and those of itiamifaetures Imist equate to a common relative level, and it is necessary t-liat this fact should he clearly recognised in a community such . as ours, the greater part, hy far, of whose income is derived from the. sale abroad of its primary products. The sooner the adjustment is over, the sooner we shall return to normal conditions ol prosperity,, and the sooner will our industries be able to absorb a large percentage of those now out of employ, ment. With a general reduction of our national income must come a general re-adjustnumt of the. distribution of that income. Wages are, in the ullmnte analysis paid out of the proceeds of production, and the proceeds of production are barely two-thirds ot wlrnt’ they were a year or two ago The capital losses on representative industrial and commercial stocks during the past eighteen months have been from 20 to 50 per cent. In consequence, it is difficult to attract capital to commercial enterprises and the difficulty will continue until a readjustment is effected, or. at all events, is in sight. While I believe that in the public interest it is desirable that industry should pay the highest' possible wages, 1 realise that there is a general tendency to overlook the significance of the important word “possible”. 1 do not believe, however, that what Henry Ford could do, in the way of, raising wages in a period of temporary deprfesson in the motor building trade, can be done in a general way in a primary producing country, in a time of world wide deflation. Henry Ford was dealing with a highly organised industry Under mass production conditions ami with a vast undeveloped market. Hin pol.ic.y, though (IniihUoiitt sound at flic time, nu« ill regard to his special pircuivistancos, cannot be generally applied, and the position of wages and unemployment in the United States of America to-day is the best proof of this. If wages are artificially maintained at an economiOiqlly impossible level, unemployment and the competition of imported commodities with our own manufactures, will increase, fresh capital for further development of our industries will not be forthcoming from profits, and recovery will be delayed. Primary production, which depends very largely nowadays on the adoptioh of modern methods, will fall back, because ot the lack of funds w k ith which to farm the land scientifically; and the principal source of our national income will become still further depleted. If maladjustment exists, as a resw«i of changed world conditions, it must be corrected before we can expect to get back to a sound basis; and no sophistry can disguise the truth of this proposition. The workers’ advocates contendd - .! that a reduction in money wages would not materially assist the primary producer, while it Woiild detrimentally affect internal trade by diminishing the purchasing power of the community. It is true that the average fanner will not be assisted to a great extent by a reduction of money wages payable under awards and industrial agreements, if the reduction be i gurded as applying only to wages directly paid by him. The wages and conditions of ordnary farm labour are not regulated by awards of this Court, and it is only in respect of certain casual and seasonal branches Of »a m work such as mustering, shearing and threshing, that the farmer comes- under the direct jurisdiction of the Court. He is, however, indirectly affected by the wages an dconditions prescribed by the Court- for workers in meat freezing works and in cheese and butter factories hi which the produce of bis land is prepared for market. He is indirectly affected, also, by the wages cost ot transport and distribution. As a consumer, of course, lie is indirectly affected by labour costs in all his purchases, whether for his own domestic consumption or for the working of his farm. Even in respect of goods that are not manufactured in New Zealand a percentage of their cost to the .tinner must be allotted to labour costs of transport, handling and distribution in this country. While it is true that a reduction in the rates of remuneration payable under award; and industrial agreements will not materially benefit the farmer as a direct employer of labour, it is equally true that be will derive a considerable indirect benefit from such a reduction. The position of the farmer to-day is clearly indicated by the index figures of export prices, as com paired with general farm costs and . retail. prices. Taking as a base the average of export

prices for the five years fi'om 1900 to 1913, and giving them an index figuie of 1000, we find that the figure rose to 1613 for the year 1929, while for January, February and March of 1961 the corresponding figures were 967, 972 and 961 respectively. With general farm costs and retail prices standing at a figure of approximately 1560, me farmer’s purchasing power is reduced by more than a third below his pre-war purchasing power. His income is actually less than it was in 1914, but he has to pay 60 per cent more for everything he buys. It was argued by the workers’ advocates that the farmers’ print pal burden was excessive land values and high interest rates. The excessive land values have, however, been very largely written down in recent years. Mr W. I). Hunt, who was a witness for the employers, testified that they had disappeared altogether, or almost altogether. Interest rates, however, remain high, though the evidence showed that in many cases mortgagees were meeting their mortgagors in a spirit of fairness, and adjusting mortgage debts as to both principal and interest. Neither Parliament nor tips Court can control interest rates. They depend on the relative supply of and demand for loanable capital. Apart altogether, however, from the relief given to mortgagors by the legislation recently enacted .or their benefit; mortgagees sefem geiieraliy to have realised that it is to their own interest to make arrangements with their inoi'tgagOrffi instead of having the mortgaged pi'operties thrown buck on their hands ol‘ endeavouring to sell them on a depressed market. The contention that a reduction in rates of remuneration would detrimentally affect internal trade, by lowering the purchasing power of the community, is so often put forward that it is necessary to examine it closely. It may he conceded that if wages generally were reduced from a standard that industry could reasonably afford to pay to a lower standard the contention would he sound. If, however, the 1 existing standard of money wages is too high to be maintained, in view ot the general economic and financial conditions affecting trade and industry, the cost of production checks consumption, and consequently chocks further production ; and the check is followed by unemployment, rationing of work, and reduced aggregate earnings of capital and Labour. The maintenance of an uneconomic-ally high standard ot money wages in such a case means a reduced output and a reduced aggregate purchasing power while a reduction of money wages to an economically justifiable standard stimulates consumption and, in its turn, production, and provides 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 7316 in the lnimher of workers employed in manufacturing industries and an increase of 41896,065 in the amount of wages paid,

The workers’ advocates laid some stress on the position of the bond* holder, and argued for equality of sacrifice. They did not suggest the adoption of a policy of repudiation, but it is difficult to see how the position of the bond-holder can he assailed without repudiating, wholly or in part, tile bond. As a community we have borrowed money in the world’s money market, and every class of the community has reaped a benefit from the expenditure of that money. Much of it has gone in providing employment and wages for our workers. Apart from the moral duty to honour our obligations, there is the ’ certain knowledge that repudiation would deal a more serious blow to our national credit than any temporary gain would compensate for. Further, as Mr Bishop pointed out, who are the bond-holders, in many cases, but the workers themselves, whose savings are represented by funds In the hands of the life insurance societievS, the savings banks, and the Public Trustee? There are 'alternating, periods of dear money and cheap money, as regards both its purchasing power and the rate, of interest at which it can be borrowed. Sometimes the advantage is with the lender, sometimes with the borrower. There are now some indications that justify the expectation of lower interest rates in the not. far distant future.

The point most stressed by the workers’ advocates was, the relation of the cost of living to wages. As 1 have already pointed out, the. cost of living is not, under The Finance Act, 1931. to.be regarded as the dominant consideration in adjusting rates of remuneration. It is, however, a relevant consideration. Under the expired legislation, when the' movement in the cost of living was affected by somewhat different world conditions than those now prevailing, the Court adjusted wages upwards and downwards in accordance with the movements in cost of living statistics. The basis adopted was the six-monthly average, "’ll view of the general and continued drop in world prices, and the lower rates of wages paid in other countries, it dues not appear to me that either the six-monthly or the monthly figures should be rigidly adhered to However, the statistics show 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 workers. stood at 1600 in the December quarter of H 930. The base in the ■case of both the cost of living statistics and the wages statistics is HX)O as at July. 1914. The accuracy of the wages statistics was questioned by one of the witnesses for the workers, but tlie Statistical Office has sincp inform-

ed the* Court that an apparent discrepancy between the present figures and some ,figures published earlier is due to the introduction of a system of. weighting within the occupational ,groups into , which the workers are divided, and that the present figures are accurate and comparable year by year. If we examine the two sets of statistics, it appears that a deduction of 8 per cent, from the average rate of wages computed on a weekly b a sis, will leave approximately the same purchasing power a« in July, 1914, if the calculation .is 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 is taken, a deduction of 10.2 per cent. from the average rate of wages will leave the same purchasing power * as in .July, 1914. It is, however, not reasonable to adopt the average- wage for .all groups of workers as a basis of calculation, for the Court has since 1914' increased tile rates of several classes of workers who formerly were relatively underpaid, with the result that the general average rate is 66 per cent, above that of 1914, while thi rate of .the unskilled worker—the so-called basic rate' labourer—is only 60. per ,cent, above that of 1914. A deduction of .4.6 or 6.8 per cent, jrpjn .the unskilled worker’s present rate',will leave him the same purchasing power as in July 1914, the calculations being based on the. respective cost ; of living index minibets. for the November, .193.0, .and February, 1931, quarters combined aud tor the month of March, 1931. The deduction justified by the cost of living statistics, taken by, themselves, is therefore 4.6 of 6.8 per cent.: according- to the-basis. , The Court, however, as 1 have al-ready-said, • is - required to regard the iribyeinept in < the cost of, living . as -a ‘ reiey.hnt'. consideration, but not as the paramount or over-riding consideration. It is a circumstance to be taken into account, but it is not to he.the dominant factor. I have already referred to the (Jaim of the workers’ advocates for equality of sacrifice. -Their contention mhy ..be summarised thus : that when prices - were rising,' the workers did Pot. receive wage increases sufficient -to compensate them fully for. the indreased .cost of living, while.- their emmade, large profits ; and that i.i now, when prices, are falling, and pro- ; ftt’s! i are smaller, the workers should ; \ :- -h?- required ito accept. lower wages. : I ; it; is. true that' award ; rates of wages ! behind the yisjhg cost of living during the period 1914 to 1920; but the 'award fates' were generally- re--gai.ded ns true miiuima, and most ; 1 .workers received considerably higher rates,, tn 1920; dealing - with the contention,l , wrote :• “Admitting that the aw a rd rates Aid not in' every case keep, pace with . the rising cost of living, there were i litany , factors beneficially affecting i-ttlre -real- earnings of the workers. 1 •Employment was. plentiful, and there .was . a ;-great diminution of casual-: ness of. employment. The award , fates were true minima and very ipany workers received substantially -higher wages. Overtime w«s regularly worked, *and w a s paid for at higher relative rates than in prewar times. In many occupations young lads became .self-supporting .almost as soon as.thef left school, .and so 'relieved, yheir parents ' pf their lnaintainaiice. Horn’s of W°rk were shortened, -and conditions of employment were improved. .Unskilled and semi-ski bed workeis . were often able to command , skilled worker’s rates of pay. All these factors must-ibe. considered before w« can. affirm that wages did not during ■'the period of rising prices, keep 'pace , with the increasing cost of ■liying. When we make proper al- > low a,nee for these matters, we cannot say that the real earnings ot the average worker did not keep pace fairly well with the increased cost of living during the period of rising prices except, possibly, lor a few months at the peak of prices. •The volume of retail trade, the in- ’ creased attdudanoes at entertainments, and race meetings, and the .general appearance of : prosperity all khdicated that purchasing-power was knot ’ dipiimshed, b l jt rather- enhanced.” i ; Sihce 1927, ;the average purchasing power of wages has exceeded the relative: level of 1914, and is to-day substantially in advance of it. Yet during. (the-past two years, there has 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'l9l4, while capital lost heavily and the position of the primary producers .became critical. Companies .are in many cases to-day .paying reduced dividends or no dividends at alfi’ It cannot be seriously urged that a reduction of approximately -40 per cent, in the value, of: our exports does not mean a very serious sacrifice to The primanny producers and to the country as a whole. ,The burden of taxation, which has. been increased and probably will be still further increased, falls principally on other classes of the community, .than the workers. Even customs taxation has been saved to the workers, through their .wages rates being adjusted morel or less in accordance with retail prices. It is impossible to keep ..wages any longer at .an uneconomic;.level. In this connection I.quote the following passage from the Monthly Summary of the National Bank of Australasia Limited for December, 1930: 1 ‘•‘Wages,;are at an. uneconomic level when, they increase the cost of a product beyond tiie cost of a similar product in other parts of the world. It is sometimes sound policy to-foster or maintain an industry . even at some economic'loss, for other than economic reasons. Considcrat-

ions such as defence, or the continuity of supply of necessaries during time of war, or even the desire to furnish greater diversity of occupation to a country’s inhabitants, may justify such a policy. Wages in an industry so fostered, if they eonform to the general standard oi wages in the country concerned, may be uneconomic, but, nevertheless, they are may be justified by noneconomic considerations. There are many excellent arguments in favour of the protection of local industries, but when the system is utilised, not only to secure the home market but also to support an uneconomic standard of wages throughout the entire, range of manufacturing industry, it becomes exceedingly dangerous, m such circumstances, the whok* ot the .excess cost must ultimately fall upon tho unsheltered and unprotected producer.” in the same issue of the Summary, the following passage appears, which sufficiently answers a suggestion made by one of the workers’ witnesses that the banking institutions were in some way responsible for the present depression : “In the midst of these difficulties we have people.who are willing to proffer any nostrum or advocate any wild scheme, which might have the -effect of postponing those courses of action which alone can restore economic health. To gain a- hearing they make the wildest and most foolish allegations against those who are inany way controllers of industry and finance. They suggest that capital has not suffered through the collapse of prices and the general depression. They make absurd and absolutely unsubstantiated statements that a conspiracy exists between the financial houses of Australia and the Old World, aimed at the workers’ standard of living. Of course,’these allegations are nothing but absolute humbug and have not a shred of fact to support them. Everybody who lias eyes to see must know that capital has lost, and is continuing to lose severely through the present depression. The outward signs are too plain to be missed by anybody who has eyes to see. They include:— Falling values of products. Fall in prices of stocks and shares. Idle Factories, machinery and plants. Smaller outputs and sales of goods. Reduced inargins between costs and selling price#. Failures to earn dividends, accompanied by long series of actual losses. , Many bankruptcies, assignments, liquidations, etc. “We-know for a fact that all the large commercial interests in the principal trading countries of the world—-England, U.S.A., France, Germany, Italy and Australia—are working persistently and strenuously in an endeavour to check the depression and open the way to a new prosperity.” “Another thing which is sometimes lost sight of is that commodity prices and wages could both show a more or less downward movement without the standard of living being seriously impaired. But what seems more important than the maintenance of any arbitrary standard of living (if there really can be such a standard; is that wages and their purchasing power are largely dependent on local and overseas conditions generally, and it would he an advantage to have the whole of our people mlly employed, even at a somewhat reduced wage rate, instead of the present condition with its extensive unemployment and part-time working.” “Another factor persistently avoid- , ed by Labour leaders is the loss ui workers’ incomes owing to unemployment and short-time working. It would undoubtedly he far better for all concerned if total wages were spread over the whole working group rather than a portion of it. The resultant gains in output and reduction in production costs would lead to increased demand and lower selling prices Seeing that the working classes provide the hulk of the market for goods produced, it is clear that they could not fail to gain as this process extended.” Both the employers’ and the workers’ advocates quoted extensively .roin an article on Gold and the Price Levei, by Sir Henry Strackosch, which appeared as a supplement to the “Economist” of - the sth July, 1930. The writer discusses the effect of even a small fall in the general level of commodity prices on the profits of enterprise, assuming that production and money wages remain constant. Referring to the fall in commodity prices, in Great Britain, which amounted to 16 per cent in seventeen months, ho says:— “Little imagination is required to visualise the many implications which spring from this state of tilings. Thus it is clear that industries which are most vulnerable to competition are the first to suffer, and that, failing very large resources to meet j losses, they are quickly reduced to impotence and compelled to suspend operations. Uneffhl yinei t is t e re- I suit, but that unemployment is. not merely confined to the particular industry that has to suspend operations but spreads over most other industries, lor the suspension of operations by one industry immediately j reacts oil others through the curtail- 1 uient of tlie requirements by the former of goods produced and ser-1 vices rendered by the latter. A ledue- , tion of money wages, possibly to a i level constituting a debasement of j the standard of living, becomes inevitable.” J I do not wish it to he thought that I consider it necessary to bring about a permanent reduction of the stanch 1 "d - of living o? the people of New Ze- a -j land even though I, am unable to accept the cost of living statistics as the sole basis of wages adjustment. When the disturbing concomitants of deflation adjusted themselves, the standard

of living- should not necessarily be any fewer than it lias been in the past- A wise man does not capitalise on inflated values; that is, lie does not embark qn extensive operations until conditions become stable. As I have already indicated, it is probable that an adjustment of prices and wages to unit world conditions will give .an impetus to Sindusti'y, where at present there is a distinct hesitation to make any forward move. Thug purchasing power and real wages, as distinguished from nominal or money wages, will tend to inereas<\ Once tlie necessity for an adjustment becomes apparent, temporising and -failure to realise the needs of the situation are far more likely to have, a lasting prejudicial-effect on the standard of living of the community than is the adoption of prompt and efficient measures designed to bring about a speedy economic readjustment.

ft may be desirable to point out that inflation is to some extent inevitable. By inflation, T do not mean a deliberate dilution of the currency b.V means of manipuVtiou of the note issue, lint tlie creation of an artificial purchasing power, and the eniarge- . ment of credits that form the basis of the currency. Keynes defines inflation a,s a relative increase in the supply of purchasing power in relation to goods and services. Mr Arthur Salter, in testifying before the United States Foreign Currency and Exchange Commission of 1925, said, “Tlie inevitability of inflation cannot be sWesstoo much. There is still too great a disposition to regard it merely as a financial vice. Inflation is in my vip.w the inevitable coainleinent of war or post-war loans.” The recent announcment that the Bank of England rate had been reduced to 2J per cent, is regarded by economists a-s a hopeful sign. A reduction in the Bank rate is an indication that money is becoming easier, and in tlie course of a few months the reduction may he reflected in greater financial facilities being available to trade and industry, with a corresponding enhane- , enient of the prices of our primaiy pro ducts. Tt is idle to hope for a re every Ito the price levels of a- few years ago. . hut an improvment to a standard rpp-. j roxiinately 25 per cent, above that of j 1909-1913 is not beyond the bounds of ].reasonable expectation. Whatever tlie new level may he, however, costs generally must adjust themselves to it. and normal conditions, of prosperity will return. [ am convinced that it is economically impossible to maintain money I wages at their present level. The substantial, reduction in the national income, and the generally lower level of I world prices, call imperatively for a reduction of all costs, including wages The only question is. Lite amount by which the rates of remuneration should be reduced. The employers’ advocate j asked that a reduction of 20 per cent. I should be marie. It must be borne in however, that award wages are l in the majority of cases regarded as .minimum rates, and Unit in normal - times many workers receive wage s in | excess, of award rates. This margin I has been rut down during the past (year or. eighteen mouths, so that a eon I siderable number of workers in employment have**- already to face some pericentage- of reduction of earnings. The I economic and financial conditions, it- ! fecting trade and industry, taken alone doubtless, justify a reduction of 1.5 or 20 percent in award rates, if,we assume . that those ITte s are representative of the actual levels of .wages now avid j eighteen months ago; hut I think that an allowance should he made for the i admitted, though unascertained, drop jthat has already taken place. A reI duction of award rates by 20 per cent. 1 would inflict a serious hardship- on those workers whose rates have already been -red iced to award levels, and more especially because such a reduction would imolve a considerable reduction iin the st ndard of living below that indicated by the cost of living statist jos. 1 have also tn consider the position of those workers who are paying off the purchase money of their homes, j Though not all the houses were bought [.at the pe k of prices, housing cost* are i fixed charges, and represent the lowest single item of domestic expenditure. In mv op : njon it- is undesirable that thrift should he discouraged and I think that a reduction of 20, or 15, per cent, woul-l tend to produce that effect! I have come to tlie conclusion, after weighing all the considerations involj ved, that a reduction of 10 per cent, in : all rates of remuneration fixed by awards and industrial agreements will, j give relief to producers and consumers, i by lowering the*costs of production and I distribution, and will not inflict undue [hardship on the workers. A smaller re. reducton would not give- the necessary relief, and it might not be possible to pas s it on. f do not think that. I am exceeding my 1 doty in urging all manufacturers, and I traders to pas s on to their customers the benefits of reduced costs. By doI ing so, turnover and net profits will 'be increased and the standard of living and purchasing power of tlie community maintained. If manufacturers and traders seek to retain the benefit of reduced wages costs as a set-off against oast looses, the adoption of j such a policy will in the long run certainly react to their detriment, ft is |by giving consumers the comniodit’es and services they require at the lowest | possible prices that their own interests ! will he best conserved. In conclusion, I desire to make some explanatory reI fere-nee. to the formal order to which this memorandum is appended. The reducton of ten per cent, apolies to all rates of remuneration, which term inj cliide s time and piece wages, and overtime and other special payments. The ‘Shops and Offices Act and the Factories Act. however, fix minimum rates of wages and overtime for certain employ ges, an-d clause- 2 of the order pre > ides

that no‘reduction may be made- that would bring the rates payable below the rates fixed by any Act. Clause 3 excludes tbe Wellington Finxmills ■Award from the operation ot tlie order Wages under this award were reduced by 33 l-3rd per cent, in December last Clause 4 safeguards existing contracts of apprenticeship. The Act itself safeguards contracts ol apprenticeship entered into under The Apprentice Act, 1923, but the order extends a similar protection to all apprenticeships. Female apprentices are not,' in tlie majority of cases, employed under the provisions of The Apprentices Act, 1923, and the Court has thought it equitable to place these apprentices in the same pc Biton as other apprentices. Clause 5 applies in the case of a tew awards, in which provision is made that wage increases shall not apply in the case of workers engaged on existing contracts. The Court lias applied the converse principle to the workers engaged on contracts now existing, thus setting off an increase against a reduction.

The order now made represents the decision of a majority of the Court. Mr Prime is in general agreement with the views 1 have '.expressed, , and bis opinion is subjoined. Mr Monteith dissents from the views of the majority of the Court, and liis dissenting opinion is also subjoined. F. V. FRAZER. Judge. (To be Continued.)