The New Zealand Railways Magazine, Volume 2, Issue 1 (April 21, 1927)
Wages—How They Might be Increased
Undoubtedly the all-absorbing question animating the minds of railwaymen at the present time is that of wages. The endeavour of this article, therefore, is to throw a little light on the question from the economic viewpoint and to review the points affecting us as railwaymen.
It is needless to stress the fact that any goods or articles that are made are the product of land, labour and capital.
The remuneration paid to the workers is called wages. Used in the economic sense the term “wages” includes all payments for personal services.
In most industries the first payment of wages is actually made out of capital, but subsequent payments are made from the sale of the products of industry and, as a general rule, are advanced in anticipation of the products. If capital were not there in the first place to bridge the gap until the industry commenced to function there would be no industry and no production.
The considerations affecting the rate of wages are many and varied. It is as well for a start, then, to fix the bounds within which they operate.
The upper limit of wages is the price of the product. No wages can be higher than this—at least not for very long. Suppose a manufacturer produces hats which he sells at the market price, and suppose further, that he gives his services, his factory and his material for nothing—the price of the hats would be made up entirely of Wages. It is apparent, therefore, that the wages of the men he employs cannot rise above that which they already receive, for sooner than do this, he would cease manufacturing hats. This is, of course, a very extreme example, but nevertheless it serves to illustrate the point.
The lower limit of wages is described as the bare subsistance theory, that is, wages cannot for long fall below that which is necessary to keep body and soul together, or the population would perish.
Having fixed the bounds within which wages may fluctuate, we will now consider the main conditions which determine the rate of wages within these bounds. These are—(a) supply and demand, (b) standard of living, (c) educational qualifications, (d) productivity of the industry, (e) bargaining power of labour.
Supply and Demand.—The volume of work offering and the number of workers willing to perform the work has an effect on the rate of wages. Should there be a sudden expansion in the building trade and the number of carpenters remains stationary, some employers will offer higher wages and thus the rate will tend to increase. On the other hand, should there be more carpenters than can be absorbed by the trade, the tendency will be for the rate to fall.
The standard of living undoubtedly has a great deal to do with the rate of wages paid, particularly among non-competing groups. Commencing with the artisan we observe that the standard of living rises as we ascend the social scale, e.g., the tradesman has a higher standard than the artisan, while the professional man has a higher standard than the tradesman and so on.
The educational qualifications necessary for the work to be carried out, together with the length of apprenticeship, etc., also affects the position, and this explains why an engineer is more highly paid than a tradesman.
The productivity of the industry is without doubt the chief factor in fixing the wages of those above the minimum. In an industry well and efficienty managed and in which the workers give of their best there is no doubt they receive more than the workers in a similar industry not so well managed or in which the workers are not so efficient or keen. An example of this is the Ford motor works in America.
The bargaining power of Labour is a factor that has played a great part in recent years in obtaining for the workers a fair share of the distribution of the wealth which they have assisted to produce.
This, then, brings us to the distinction between real and nominal wages. The nominal wage is the amount a man receives in £. s. d. The real wage is the amount he receives measured in commodities. If a man who was receiving £4 per week in 1914 is now getting £5 10s. per week his nominal wage has increased by 37½ per cent., but if the cost of living has gone up by 50 per cent., his real wage has fallen. What then concerns a man is not his page 33 nominal wage, but his real wage; similarly, what concerns an employer is not the nominal wage he pays his employees, but the real wage.
In 1926–1927 our Railway receipts from all sources were £8,460,761. The payments in round figures were, wages £4,000,000, stores £2,000,000, interest £1,913,310, other payments £547,451, total £8,460,761.
Applying the foregoing principles to the railway service we find that there can be no increase in wages unless there be first an increase in the earnings of the industry. There are two ways of attaining this: (a) by reducing the costs of operation, (b) by increasing production.
Whether the payment on account of stores could be reduced is largely in the hands of each individual railwayman. A 10 per cent. reduction in the consumption of stores would result in a saving of £200,000 which could be made available for distribution as wages.
The alternative is to increase the net revenue. This can be effected by (a) increased earnings, (b) decreased expenditure.
Increased earnings can be brought about by an increase in the tonnage and number of passengers carried, or by an increase in the tariff rates. This latter phase, however, is outside the sphere of this article.
The trade of this country is continually expanding and there is no doubt that as years go by the earning power of our railways will continue to increase. As mentioned before, what concerns an employer is the real wages paid, which, again, is dependent upon the output per man. Here then is a chance for every member of the service to increase the net earnings of the Railways. By every member entering with zeal into his everyday task and eliminating all sources of waste there is no doubt that the amount available for the payment of wages will be increased. In this lies the chief hope of the railwayman for an increase in wages. Here is an opportunity within the grasp of all—Will you take it!