ARBITRATION COURT

Hokitika Guardian, 2 June 1931, Page 2

ARBITRATION COURT

THE AWARD

(Continued.) OPINION OF MR PRIME. The Finance Act, 1931, under which the above order is made, prescribes, j in effect, that the- principal considers!- j tio.u,s to be observed by the Court is j the economic and linanciai conditions affecting trade and industry in New Zealand. It was made clear in the case presented on behalf of the employers that the National Income has been reduced by at least thirty per <V cent. These figures were not seriously !i ' challenged by. the advocates for the ' ' unions, and it is a matter of common knowledge tha+ the purchasing power of exports, on which we ctepVid mai.n-----r-vly for our Income, has beeri reduced below the, level ruling in 1914. Cheese prices are lower than at any time .... during the present century; the payr,a out for butter this year will He lower than in any year since the 1907:8 season* lamb prices average about 22 per cent, less than 1914; s wether muty ton stands at about 40 per cent, down; while'cross-bred wool is worth to-day ' little more than half the 1914 T values, --. pj [ f i In an article bv. Sir H p nry Strak°'-']h in ‘The Economist’ of sth July, 1930, which was quoted from by both parties at the hearing, this passage occurs”... ,if 'it is. considered that am annual H 1 * crease of production of 3 per cent- will counteract the ill effects of a fall in the general level, of prices of only about 2.9 per cent. per annum, the profoundly disturbing effects of the fall of 16 per cent, during the last seventeen months will be appreciated.” 1 The fall in the general level of prices for New Zealand products i-n the last two years has been very much greater than the 16 Per cent, mentioned by Sir Heurv Strakosch (the article deals with British and while there has been a substantial increase in the volume, of production, it is'far 'Toss' 'tlUri ‘ 'ttbiiWj'be'‘•fewhimT to offset the fall in prices. This is borne out by the fact that the total value of exports for the rear eu' wl 31st* ' March,' ‘1931y, ;• was - -about SI ”<5; - millions lees’, than for I the ended oi r+i ' f l929; i ' To ’ • quote-' ; Si r Henry Strakosch again;— j ' ■ “Little imagination is required to 1 /visualise the many implications which spring from this state of r ”~ "ihin;;«. Thug it is dear that • ' dustnes which are most vulnerable to competition are the first to suffer, and that, failing very largo resources to meet losses, they are ,„ .„ quickly reduced *•; to impotence . and •y* Compelled to suspend- .operations. 1 ZC Z Unemployment is the result, but •*n unemployment is not merely T Qoufined to the particular industry • jj- -iliat has to suspend.operations, but J ;.* "spreads over most other industries, •£ --for the suspension of operations by '/'-one industry immediately reacts on j others through the curtailment of ;* the requirements by .the former of v goods produced and services rendered by the latter. A reduction of money, wages, possibly to a level eonstitutjng a debasement of the standard of living becomes inevitable.” i „ • t # The truth of the foregoing proposition is exemplified by the state of. 1 trade and industry in New Zealand to-day. It is undeniable that capital has suffered serious losses, and that! the curtailment of -the purchasing •3 power of exports has resulted in lessened commercial and business activity with a) consequent increase in un- 1 employment to an extent never known 1 •Hit New Zealand before. There appears to be only one way in which the posi- j £jon can be alleviated; that is by making -our -available • ■ i«| other words, our National. Income, further. This'.cari'-’h© done'"bhly"'' by ‘ reducing the money rates of wages. ( The question is by what amount. the present rates are to be reduced, j No one, least Af" all responsible employers who realise that a reduced standard of living must react on • them, wants to see the standard °f the people reduced, if it. can b© avoided. . But can it ? With an all round fall iri income, expenditure must be lessened to a relative level. Sacri-1 fices must be made. Capital already has suffered; so also have those workers who are out of employment or who are working short time. Those who are in employment must shoulder' their share of the burden. One of the relevant considerations j which this Court should take into ac~ 1 count in making a ny order for re- 1 duction in rates of wages, is the cost of living. Recent statistics show a very considerable fall fn the cost' of, living, particularly in the food groups-, the index figure for March last* shows ‘ the increase in the cost of food was ■then only 26.4 per cent, above the level of 1914. It is true that many, other items go to make up the total cost ,of living, but in considering the possibility of hardship being entailed by wages reductions, it should be re-j mtimbered that the ability to buy; food is the last thing which should be curtailed. And it is in this item that the greatest fall in prices has taken place. The Abstract of Statistics shows Iffuit 'the level of general standard

rates of wages for males stands at (iU per coni, above 1014. Tile cost oi living, all groups, for the February 1931 quarter .stood at 50.49 per cent. A reduction of 10 par cent; in the I level or general standard rates of J wages, at present 6(3 per cent, above j 1914, would reduce the level of sLantliard rates to 49.4 per cent. a bo v e 1914, or 3 per cent, above the cost of living figure for March. It was contended at the hearing that a reduction in wag&s rates would imperil the position of a large section of workers who own their homes and who are paying fixed rates of interest, and in many cases making repayments of principal. An analysis of the cost of living figures shows that a substantial reduction in wages rates can be made without unduly affecting these people. Taking the vear 1f25, it, September of which year the prm.nt ota*.dol’d of wages rates w.n adopted by the Court, as a basis, it is Joi.nd that m mat year the xnt ni iinng all groups index: fiinres stood at l* l --: or (>9.d pet’ cent, above 1911. him mating the index figure for rent, and allowing the proper relative weighting fpr .each of the other groups, the index figure for the remaining groups was 1625, or 62.6 per cent, above 1914. The 'relative figures for the February quarter, 1931,) are—all groups 1504, and eliminating rent, 1435. The latter figure represents a decrease in the cost of living, excluding rent, since 1925, of 11.7 per cent. If, during the past five years, the workers under consideration have been able to keep up their payments, and assuming that these payments bear a similar relation to income as the proportion allowed for rent in the cost of living index figures, a reduction of 11.7 per cent, in wages now would leave them relatively in the same position as in 1925. It is admitted that those who purchased houses at the peak oi prices which the rent figures show as being in 1929, though the peak in the cost ’of building ' probably’ ‘ was reached a year or two before that, may be in difficulties. But many other people, whose incomes are not governed by /’awards,' will be in‘the. .same difficulty, and' it may he.argued that all property owners may* be classified as capitalists. lAs to this class, it may be observed 1 that it is contended by the workers’ advocates that the results of the fall in National income should fall first on {h4n. Vuftlfe^ r **it’~‘ui com’nfon^u'>« f--1 ledge that mortgagees are compromising with mortgagors who are in diffi--1 culties, and, }» their own interests, they would be unwise to force sales at the present-time, rather tlmp ya§e the 1 position .for, tlieir existing mortgagors. As to the position of those who payrent, evidence ia not wanting that a substantial fall has taken place recently in rents, and the indications are that a further fall will' fdllow. Returns obtained from three of the leading land agents in Wellington covering eighty-two houses, and showing the .rentals las at.i 2nd February, 1930 and at 2nd February, 1931, show an aver- , age reduction of 16 per cent. It is to be expected that similar reductions will take place generally throughout the Dominion. Having regard to the economic and - financial conditions affecting trade and industry in New Zeaalnd, and taking into account the recent fall in the cost of living, together with the fnc* that reductions in wages rates shoo 1 ' 1 cause the cost of living to faff st4!l further, I am of the opinion that a reduction in wago rates of 123 per cent could be made without inflicting hardship. The greater the reduction the more readily would the cost of commodities fall. A substantial fall is ...required to .allow primary producers [to purchase the commodities necessary production so that production shall be not only maintained, hut increased. If this aim is attained, trade and industry will recover to the benefit ol workers generally,- and of those who 7 are at present unemployed m particular. While expressing the view that a reduction of per cent, is warranted, I nevertheless concur with His Honor’s decision to make a reduction of 10 per cent. I think it my duty to point out to employers the necessity of endeavouring to pass on in reduced prices of commodities the saving which will he made as a result of thU order. The purpose of the reduction in wage rates is to enable trade and industry to rea whole. The opinion has been expressed bv leading economists, that cover for the. benefit of the Country as of primary products will eventually stabilise, at a levC] somewhere 1 about 25 per cent, above that pf 1914. If this is so, it will be necessary for New Zealand so to arrange- its wages and price standards that trade and business can bo c ar ricd on successfully on t'iat level. The present reduction will not bring us down on that level, and it will be impossible- to reach it only j.f tiiose ten gaged h-i commerce •will assist b v bringing down prices of commodities to an extent relative to the savings made. The savings should he cumulative if -manufacturer, transporter, wholesaler and retailer each pass on their proportion. If thflt is done, wo shall be able, by subsequent steps, to get down to a basis which

COMMENTS BY ASSESSORS

will conform to the level of prices obtainable lor our exports, without endangering the standard of living of our people. Then only, shall we be in a position to concentrate on increasing the country’s production, which is the only way in which the standard of living of the people may steadily be improved and the Dominion maintain prosperity. DISSENTING OPINION OF MR MONTEITH. I dissent from this 10 per cent, reduction made from wage rates, overtime and special payments under awards and industrial agreements. The Court was supplied with a considerable amount of data. The present world depression in my opinion is .caused by the mal-distribution of national income. Increased production •lias taken place, but increased production only becomes ail advantage if it is reflected in a higher standard of living which means a corresponding expanded market for goods sup; lied, instead of this, wealth production has. been absorbed by capital expenditure which was not justified, nnd the writing up of the value of existing capital. It is interesting to note the change oi the system about the year 1900. Foi the last century and a quarter all man’s efforts have been put into increased production and man’s success has beep phenomenal, he has created a machinery age. But the social conscience in regard to the standard of living has not kept pace with his power to produce, To-day ns a result We have millions of unemployed, we have overstocked markets and idle plantsIt is osMontiul to maintain increased consumption at the same ratio as production, otherwise a glut must result. Thus in the last century we have witnessed cycles of so called overproduction, in reality underconsumption, Tlr cycles happened periodically hut at more frequent intervals, until to-day we sec unemployment a permanent factor, and overstocked markets likewise. in the past nations alter wars have (applied themselves ’ to industry and by greater output been able t<meet the increased interest bill on theii national debt. To-day however markets are restricted, in fact all known markets are fully Supplied, all nation-., are pursuing a policy of supplying their own internal wants as far as possible, thereby cutting down imports and at the same- time increasing exports. In addition tiie policy of getting back to the gold standard lias had the effect of depreciated goods and appreciated money, so that all efforts to pay increased money interest by. increased production (goods depreciated) only adds to tbe overstocked rmiirket and results in felling price levels, because the class that live wholly on incomes derived from interest efinnot materially aid consumption, as they ; generally! already have lived a full life. In a period when goods and land is depreciating xu value nnd money is appreciating incentive to purchase is depressed and purchasers live in the hope that price levels will be lower to-morrow, and onljfb’ufy suffi. eient for urgent wants. Snowden in |;lh hook ‘'Wages and Prices” deals with wages and prices and states that from 1850 to 1900 the calculation of prices based on an average wholesale cost large number of articles in common!, use, shows they were lower by 11,7 per cent, while, wages increased by 77 per cent, over the same period. Since 1900 to 1914 prices increased by 16.5 per cent, and no corresponding increase 4n wagds was made. He also mentions the gross increase in the amount of income between 1901 td 1914, £487,000,000 to £670.000,000, Here we see the change in the system about the end of century. Since the war we have witnessed wonderful'strides in machinery output, all of which has been capitalised. In New Zealand we have witnessed the same movement, wages increasing over and above prices till about 1905. Since 1914 to 1927-8 prices exceed wages. The wage base of the Court w s the Government Statistician’s July figure of 1000, and the Court took all labourers’ rates contained in awards or agreements made twelve months prior to that date and averaged them. The cost of living increased by 4 per cent, during that period and it is fair to take the mean of the twelve months which in effect shows that wages started with a handicap of 2 per cent, at the base-. From 1914 to 1927 without including this 2 per cent., award rates never gave the 1914 standard o r living, and it was only after thirteen years that workers got hack to the 1914 standard. It has to he remembered that New Zealand had a very prosperous time, hut award wages did not reflect that prosperity. The majority of the Court may streps the table of award' wages figures of 1600, with on increase of 50 per cent, in the all groups figure,, hut confederation ol 1 the 2 per cent, loss at the base, which is 3 per cent, now, and the figure is for male adults only, and the weighting was made inside, the groups about 1927 and worked back to 1914. If the figure for females (who are eominn' into industry in larger numbers) and the 3 per cent, were taken into eons’deration the figure would b° considerably less, and show that sine" 1927-8 the 'worker lias slightly exceeded the 1914 standard but because a" price levels lately suddenly falling and wage rates slightly increasing, to-day the worker is iii excess of 1914 hr about 5 per cent., but he has a lot of leeway to make up. Tbe employers put in returns of industries to show the* a very small return on nominal capital had been secured, amongst these industries was the freeing industry. Tf ever the effect, of overeapitM'sntion were apparent, it is Imre. When the Court had a former freezing workers dispute before it an investigation was made and the result placed befere tlm Court. Tn one instance nearly half a company’s capital had been sunk in

-a new works some eight years ago, and the works only operated one season and have stood idle since. Economists are to-day agreed that overcapitalisation of industry is one of the greatest factors in industrial trouble of our time. Plants to-day are idle or working short time and this means that overhead costs cannot he reduced. but lessened output by working shorter time must mean increased cost per unit of product-on. Tin* workei suffers by short torn* ' , nip!>*ymeiit the farmer cannot get cheaper g--- <L -ml the fanners’ market is re-sn'iot* d l>,\ reason of the smaller purcinisiug power of the worker. Again Mr i'aucett, Government Farm Eocnomist, stales that every penny increase in the pricy of butter added one million pounds to land values in New Zealand. The statistical report on dairy production shows toe cost of manufacture of butter at 2.57 pence per pound. Oi tli-s let mq say, .84 is paid in wages and salaries, ami further dividing tnis amount shows that managers and secretaries get- .38 and workers get under the Dairy Workers’ Award .46 of a penny per pound. It is clear that the inerease in land values, mortgages, and increased interest rates, are the cause of the farmers position. They suffer neon use of overcapitalisation, it must be so because the cost of maim acture of butter during recent years has decreased, Their relief is to be secured lrojn mortgages and interest. This win assist them to again become possessed of a real purchasing power, but we should not take from one needy class to give to another needy class. The former of which are not in any way responsible for the position of the latter. The lot of the genqrivl labourer is certainly that of A needy person, if he • secures full time employment ho receiyes £4/0/8 but being on an hourly wage he suffers from broken time caused bi’ wet weather and casual employment. In Australia various Arbitration Courts have computed this loss at from 10 to 20 per cent, The position of the wool market lias been stressed, it lias because the price of wool went out of the reach of a large number of consumers and a substitute was also the substitute artificial silk became fashionable. Again fashions of to-day reflect the economic position and for many years less material was used in dress. Now wool has cheapened and will he again within the reach oi its former users, it may regain its market but it is clearly a case of depressed purchasing power and high price levels causing consumers to find a substitute and the wool producer who capitalised his land on high price levels suffers. The general labourer in the average has been the base of wage rates in New Zealand and the budget of average household expenditure lias been made up on the following basis: Food, 34.13 per cent; clothing 13.80 per cent.; rent, 20.31 per cent:; iuel and light, 5.22 per cent.; and miscellaneous expenditure, 26.45 per cent, On a 10 per cent, reduction he will have roughly the following amounts to spend: Food, £l/4/11; clothing 10/1, rent, 14/10, fuel and light, 3/u; misciplhxneous'expenditure, ''l|/f, Jt may happen that any one item may lie exceeded and of course another item must be reduced. These figures are based on a full week’s employment. The idea of the 10 to 20 per cent, given by some A. m* i.n r.mrts in Australia is to give cl• «<u !>, fs ue full weekly rate, in other wortiv r»hv qonje compensation for the wthtiMness of tbe employment. This is an important difference in principle, and make a great difference in tiio lot of the general labourer here arid elsewhere.

It is correct that the exports have dropped by ten and a half millions between March 31st, 1930 and Mjarch, 31st, 1931, and hard times have made more casual the employment of workers genei'ally. The Legislature instructed the Court to take the financial and economic position into consideration of industry and it is clear that we are suffering, but I do not ti ink it reasonable to fix a wage less t-ia n ihe 1914 -standard nor such a wage tint ignores tbe hardship east on the \vt ker .of increased casual employment,