IS IT DRIFT?

Sun (Auckland), Volume 1, Issue 5, 28 March 1927, Page 10

IS IT DRIFT?

OUR ECONOMIC POSITION “PROPERLY CAUSES ALARM” FACING THE FACTS (From Our Resident Reporter.) WELLINGTON, To-day. It was an inopportune moment in the history of Xew Zealand that the Bishop of London, a stranger to these shores, chose to expound his theory of increasing the Dominion’s poulation to ten millions—a moment when State administrators were striving to retrieve the indiscretions of yesterday and recover from the set-back which the procession of industrial advancement had received. A sound and logic- ’ view of the position in which land finds itself is ventured u. . .essor B. E. Murphy, Professor of Economics at Victoria College University, Welling-

ton, who faces the facts as they appear, irrespective of political or personal feeling. Professor Murphy, in granting his first newspaper interview to THE SUN, does not murmur platitudes for the edification of an expectant people; nor does he dwell upon pessimistic emotionalism. He outlines the causes of the present situation and adds a suggestion for future policy. •‘ln spite of the absence of complete comparative statistical data," he said, "it is clear that unemployment is more extensive and persistent than it has been at any time during the past generation. Compared with other countries, even at a similar stage of development, the present volume of unemployment is not heavy. Rather it is light; but it is so unusual in our experienc e as to have properly caused considerable alarm. "Since the ’9o’s a shortage of labour rather than unemployment has been the rule in Xew Zealand, because of the extremely rapid development, and it is to this shortage rather than to our labour legislation that the high standard of our worker is mainly due. PRICE OSCILLATION “A completely satisfactory explanation of unemployment has never been given in any country, but there seems

no doubt that the following are the main factors, though almost certainly not the only factors —causing the present position in New Zealand. "First, a diminution of our prosperity primarily due to the £10,000,000 shrinkage in the country’s income for last year, and in my opinion the general movement of the price level, which from about 1921 has tended downwards. The price level moves up and down for reasons that have never been completely explained in swings of about a generation. On the upward movement (and in New Zealand it lasted from 1895 to 1920) there is no difficulty, generally speaking, in a country such as ours in absorbing all the labour that has been available. The world price-level determines our national income and the way it should move. When prices are high prosperity diffuses through the country and causes a firm demand for commodities and services—and therefore for labour. When it is tending downwards it has the opposite effect and employers are disinclined to commit themselves in face of the industrial prospects. Prior to 1895, when for a generation there was a period of falling prices, unemployment was rife in New Zealand, conditions were bad and thousands of people left the country. "The second major factor is the im-

migration of more working people than can be comfortably absorbed. When employment is relatively stagnant it is not easy to find room for these people in addition to our own labour force. It is not right to assume that every immigrant in bad times necessarily displaces the local worker, because people make work for one another. OVER STANDARDISED "But there seems no doubt that in stagnant times the immigration of workers on a large scale extrudes from employment, or prevents the absorption into employment, of a fair number of our less efficient workers. The extent of this displacement has not been worked out, but it seems desirable that immigration should be retarded when the high unemployment index shows that the labour market is not responding easily. "The third important reason for unemployment is that our wage rates are not sufficiently plastic, and are over-standardised, but in many cases are not accompanied by a sufficient degree of efficiency to make labour profitable to employ. Employers expect when they engage labour that the product of that labour will not only pay for its wages but leave a surplus, and if it is not possible to pass on labour costs in this manner the least efficient man will be turned

out of work because he did not reproduce the value of his wages; and employers will not engage labour at a loss. "There is no doubt that our methods of wage fixation incline the worker to look to conditions rather than to production as a source of increased wages. In the long run wages are paid out of production and cannot be paid out of anything else. £2,000 PER MILE LOSS "One danger of the situation is that the community’s concern for the welfare of unemployed workers may lead to the adoption of hasty and ill-con-sidered temporary remedies that may ultimately aggravate the disease. Among these perhaps would be the indiscriminate production of unsuitable industries which would provide employment for some men men only at the cost of removing it somewhere else. "Another danger is the use of the Public Works fund as a gigantic system of poor relief. Public works should be built (specially out of borrowed money) only if there is a reasonable probability of it proving productive, and to set them in motion merely to absorb unemployed labour would accentuate and not cure the difficulty in the long run. "For example, the construction of

railways at a cost of from £20,000 to £30,000 a mile merely to absorb seems uneconomic in a high degree, because, owing to the competition of motor transport, it is probable that such railways would involve an annual loss of something like £2,000 a mile per annum.”