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War Economy

The First General Wage Order, August 1940

The First General Wage Order, August 1940

With as yet no really effective restraint on rises in the cost of living, it was to be expected that wage earners would want their real rates of earnings to be maintained. Following precedent established in World War I, and again in the depression of the 1930s, emergency regulations had been prepared to give the Court of Arbitration power to amend award wage rates by general orders at intervals of not less than six months. The Regulations2 were approved in Cabinet in May 1940. They required the Court to take into account trading conditions, the cost of living, and all other conditions deemed to be relevant.

In the June quarter of 1940, retail prices rose a further 1 1/3 per cent and were then 3 1/3 per cent above September 1939 and over 5 per cent above March 1939.

The first General Order of the Court of Arbitration was made and took effect in August 1940. It granted to all workers who were subject to the Court's jurisdiction an increase of 5 per cent on their wage rates.

While the 5 per cent wage increase was justified by past price increases, it was unlikely to end the upward movement, and in fact it became another influence tending, by pushing up costs and prices, to defeat the stabilisation attempt.

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Despite all attempts to hold prices, they continued to rise. Pressure came from a variety of directions. An interesting illustration is found in the experiences of the Director of Housing. In a minute of 26 August 19401 he reported to his Minister that rises in the cost of state houses were becoming more evident, due to (a) increased costs of materials on account of war conditions, scarcity of stocks, extra freight charges, and insurances, (b) an additional 5 per cent sales tax imposed in June 1940, and (c) mounting costs resulting from a 5 per cent wage increase effective from August 1940. The Director stated that the cost of a house unit of 1000 square feet had gone up by £97 since March 1940, representing an increase of from 21s. to 22s. 11d. per square foot, or over 9 per cent.

In varying degrees, costs of consumer goods and services were affected by similar upward influences. Even with the Price Tribunal keeping control over some profit margins, cost changes made further price increases inevitable.

2 The initial legislative step in the control of wages and remuneration was the gazetting of the Rates of Wages Emergency Regulations 1940. The 1940 regulations provided that the Arbitration Court from time to time, on application, might amend by general order the provisions of all awards and industrial agreements.

1 War History narrative No. 24, p. 7.