PURCHASING POWER

Wairarapa Times-Age, 28 April 1938, Page 10

PURCHASING POWER

WAGES AND LIVING COSTS EXAMINATION OF PRESENT POSITION. STATEMENT BY ASSOCIATED CHAMBERS. A good deal has been said over the last twelve months on the increased cost of living, and the extent to which the increased wages paid to workers have been affected as regards their real purchasing power (says a statement by the Associated Chambers of Commerce of New Zealand). So far, a fact which has not been brought out is that the majority of wage-earners are not in such an advantageous position as they might believe.

As the Minister of Industries and Commerce has properly pointed out, “money” wage rates are not the same .thing as “effective,” or “real” wages; what counts is the purchasing power that is possessed by “money” wages. “Money” wages are affected by retail prices—that is, the cost of living—and, as the Minister has also stated, “retail price movements touch every member of the community.” If the cost of living increases at a faster rate than do wage rates, then those “money” wages, although larger than before, actually suffer a shrinkage in their “real” value, or purchasing power.

EFFECT OF FARM WAGE RATES. The Minister said in March of last year that “the increase in the cost of living has been more than offset by the wage and salary increases, and the people have still a substantial margin which represents the difference between their increased wages and the increased cost of living.” The Minister put forward, in support, a table, based on the Government Statistician’s usual periodical statistics on wages and retail prices, to show that “effective” wage rates as at December, 1936, had increased by, 11.9 per cent over 1935—this percentage being the increased margin, as compared with 1935, left to the wage-earner after meeting the increases that had occurred in the cost of living (embracing groceries, dairy produce, meat, rent, fuel and light, clothing, drapery and footwear, and “miscellaneous” items). It has since been stated in Parliament that the “effective” wage rate increase to wage-earners as at December 31, 1937, was 7.8 per cent as compared with 1935 —the decline from 11.9 per cent being due to the fact that the cost of living had increased at a faster rate than had “money” wage rates over the intervening period. These figures, based as they are on the official all-industrial-groups table, are quite correct as relating to the wage rate index for all the industrial groups combined, and we are making no criticism of the Government Statistician or of the tables he publishes in this connection. However, when the published all-groups table of “money” wages is dissected, some further facts come to light. Analysis shows that the “effective” wage increases of 11.9 per cent and 7.8 per cent are due principally to the inflation of the all-groups-combined index by the disproportionate “money” wage rate increases to wage-earners engaged in farming pursuits. The index figures for this industrial group show that their “money” wages, as at December 31, 1937, had increased by 56.7 per cent over 1935, and their “effective” wages by 38.2 per cent. These wage increases for farm workers are considerably in advance of the increases taking place in the other industrial groups. The position of these other groups combined would be brought out more clearly if one were temporarily to exclude the index figures for the farm workers’ group, for the purpose of comparisons. However, such a separation of the published figures is not as simple a matter as might appear, complicated processes have been employed by the Government Statistician in compiling the money-wage index figures for each industrial group, and for all industrial groups combined. We are not in possession of all the data from which the Government Statistician computed his indexes, but we have made some calculations which arrive at a rough approximation of the index figures for all groups (except farm workers) combined, and we have then employed the same formula as the Government Statistician in translating these into figures expressing “real” wages. The following is the position as closely as we are able to arrive at it:— “EFFECTIVE” WAGE RATES. Approximate Increase Over 1935. Increase per cent at Dec. 31, 1937. Including Excluding farm farm workers. workers. Money wage rates 22.2 14.1 Retail prices 13.3 13.3 Effective wage rates 7.7 .6 The table shows that the wages of the great majority of industrial male workers, despite increases in their “money” rates since 1935, actually have an increase in “effective” value of less than one per cent, so that the benefit of rising wage rates has been almost cancelled out by the more rapidly rising cost of living. As already stated, this increase of .6 per cent is only an approximation, and is not necessarily the true and accurate figure. It would be illuminating if the Government would have an authoritative table prepared giving the “real” wage increase over all industrial groups, excluding farm workers. In any case, whatever the correct figure, there is no question that the

“real” increase in the wages of the great majority of industrial wageearners over 1935 is considerably less than 7.8 per cent. This proves that the practice of increasing wages, and of going on increasing them, has failed to give most wage-earners any advantage other than a temporary one, although at the same time loading industry with higher costs. It is to be noted that the “effective” wage increase of approximately .6 per cent applies only to wage-earners in full-time employment at award rales of pay, and not to the average of all wage-earners, inclusive of those unemployed or working short-time. Furthermore, the figures given take no account of the larger amount wageearners have to pay on their increased wages in employment-promotion taxation and income taxation, which further reduce their “effetive" wages below the margin given.

The increased amounts which companies have to pay in the heavier rates for income tax and land tax do not fall directly on the wage-earner, but they are, to a considerable extent, written into higher costs of living. It therefore becomes obvious how oppressive taxation such as exists in New Zealand today is playing its part in robbing wage-earners of any effective advantage from the increases in money wage-rates that are being afforded them.