OPINION OF MR PRIME

Otago Witness, Issue 4029, 2 June 1931, Page 23

OPINION OF MR PRIME

GENERAL ORDER ENDORSED. Mr W. Cecil Prime, the employers' representative on the court, signifies his adherence to the general order in the following terms:— . The Finance Act, 1931, under which the above order is made, prescribes, in effect, that the principal consideration to * je observed by the court is the economic and financial conditions affecting trade and industry in New Zealand. It was made clear in the case presented on behalf ot the employers that the national income has been reduced by at last 30 per cent, .these figures were not seriously challenged by' the advocates for the unions, and it is a matter of common knowledge that the purchasing power of exports, on which we depend mainly for our income, has been reduced below the level ruling in 1914. Cheese prices are lower than at any time during the present century; the pay-out for butter this year will be lower than in any’ year since the 1907-8 season; lamb prices average about 22 per cent. Ices than 1914; wether mutton stands at about 40 per cent, down; while crossbred wool is worth to-day little more than half the 1914 values.

In an article by’ Sir Henry Strakosch in the Economist, of July 5, 930, which was quoted from by' both parties at the hearing, this passage occurs:—“ ... if it is considered that an annual increase 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. P® r the profoundly disturbing effects of the fall of 16 per cent, during fche last 17 months will be appreciated.” The fall in the general level of prices for New Zealand products in the last ars has been very much greater than the 16 per cent, mentioned by Sir Henry’ Strakosch (the article deals with British conditions), and while there has been a substantial increase in the volume of production, it is far less than would be required to offset the fall in prices. Ihis is borne out by the fact that the total value of exports for the year ended March 31, 1931, was about £17.5 millions than r f °r the year ended March 31, 1929. To quote Sir Henry Strakosch again:—

Little imagination Ls required to visualise the many implications which spring from this state of things. 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 losses, they are ly reduced to impotence and compelled to suspend operations. Unemployment is the result, but that unemployment is not merely confined to the particular industry that has to suspend operations, but spreads over most other industries, for the suspension of operations by one indurstrv immediately reacts on others through the curtailment oi the requirements by the former of goods produced and services rendered by the latter. A reduction of moneywages, possibly to a level constituting a debasement of the standard of living becomes inevitable. . The truth of the foregoing proposition is exemplified by the state of trade and industry in New' Zealand to-day. ' It is undeniable that capital has suffered serious losses, and that the curtailment of the purchasing power of exports has resulted in lessened commercial and business activity with a consequent increase in unem-P-oy ment to an extent never known in New Zealand before. There appears to be only one way in which the position can be alleviated; that is by making our available resources, in other words, our national income, go further. This can be done only by reducing the money’ rates ot wages. REASONS FOR REDUCTION The question is by what amount the present rates are to be reduced. No one, least of all responsible employers who realise that a reduced standard of living must react on them, wants to see the standard of living of the people of NewZealand reduced if it can be avoided. But can it? With an all-round fall in income, expenditure must be lessened to a relative level. Sacrifices 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 which this court should take into account m making any order for reduction in rates of wages, is the cost of living. Recent statistics show a very considerable fall in 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 t in considering the possibility of hardship being entailed by wages reductions, it should be remembered 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 that the level of general standard rates of w-ages for males stands at 66 per cent, above 1914. Ihe cost of living, all groups, for the February, 1931, quarter stood at 50.4 per cent, above 1914, while the figure for March, 1931, was 49.1 per cent. A reduction of 10 per cent, in the level of genera! standard rates of wages, at present 66 per cent, above 1914, would reduce the level of standard rates to 49.4 per cent, above 1914, or .3 per cent, above the cost of living figure for March. MORTGAGES ON HOMES

It was contended at the hearing that a reduction in wages rates would imperil tlie 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 show's that a substantial reduction in wages rates can be made without unduly affecting, these people. Taking the year 1925, in September of •which year the present standard of wages rates was adopted by the court, as a basis, it is found that in that year the cost of ( all S rol, P s ) index figure stood at 1622, or 62.2 per cent, above 1914. Eliminating the index figure for rent, and allowing the proper relative weighting for each of the other groups, tlie index figure for the remaining groups was 1625, or 62.5 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 of 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 be argued that all property owners may be classified as capitalists. As to this class, it may be observed that it .is contended by the workers’ advocates that the results of the fall in national income should fall first on them. Further, it is common know-ledge that mortgagees are compromising with mortgagors who are in difficulties, and, in their own interests, they would be unwise to force sales at the present time rather than ease the position for their existing mortgagors. As to the position of those who pay rent, evidence is not wanting that a substantial fall has taken place recently in rents, and the indications are that a further fall will follow. Returns obtained from three of the leading land agents in Wellington covering 82 houses, and showing the rentals as at February 2, 1930, and at February 2, 1931, show an average reduction of 16 per cent. It is to be expected that similar reductions will take place generally throughout the Dominion.

CONCURRENCE IN REDUCTION Having regard to the economic and financial conditions affecting trade and industry in New Zealand, and taking into account the recent fall in the cost of living, together with the fact that reductions in wages rates should cause the cost of living to fall still further, I am of the opinion that a reduction in wage rates of 121 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 to production so that production shall be not only maintained, but increased. If this aim is attained, trade and industry will recover to the benefit of workers generally, and of those who are at present unemployed in particular. While expressing the view that a reduction of 12 J per cent, is warranted, I nevertheless concur with his Honor’s decision to make a reduction of 10 per cent. PRICE REDUCTIONS" URGED 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 be made as a result of this order. The purpose of the reduction in wage rates is to enable trade and industry to recover for the benefit of the country as a whole. The opinion has been expressed by leading economists that prices of primary products will eventually stabilise at a level somewhere about 25 per cent, above that of 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 be carried on successfully on that level. The present reduction will not bring us down to that level, and it will be possible to reach it only if those engaged in commerce will assist by bringing down prices of commodities to an extent relative to the savings made. The savings should be cumulative if manufacturer, transporter, wholesaler, and retailer each pass on their proportion. If that is done, we shall be able, by subsequent steps, to get down to a basis which will conform to the level of prices obtainable for 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.