Wages Situation

Financial Statement – in the House of Commons on 25th April 1944.

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What has happened to wage rates in the three years that have since passed? In 1941, wage rates were 21 to 22 per cent. above the level of September,;939. In 1943, the increase had reached 35 per cent. to 36 per cent. on the average of the year. To-day, the rise amounts to 4o per cent. This is the increase in wage rates. Earnings have, of course, increased considerably more. Thus, during the period over which the cost of living index has been rigidly stabilised, wage rates have risen by about 15 per cent. A number of these increases were necessary to remedy anomalies in particular industries. No doubt other increases have been justified by a significant increase in the efficiency of labour, despite war-time handicaps, but there has been, in certain directions, an increase in the effective labour costs of domestic production. When the stabilisation policy was first introduced, wage rates had risen 6 per cent. less than the cost of living, but to-day they show a rise of 11 per cent. more than the cost of living. It would place the stabilisation policy in an altogether false perspective, and the purpose of it would to a large extent be stultified, if the Government were to continue blindly pouring out subsidies, to keep the cost of living down rigidly to a pre-determined level, without regard to the current level of costs and wages. The apparent ease with which the stabilisation policy has, so far, been carried out, must not be allowed to mislead people into taking it for granted. I should be failing in my duty if I did not remind the country of the vital link between wages and prices and warn them frankly that grave dangers loom ahead if the tendency to a general upward movement is not kept in check. It is equally important that industrialists should do everything they can, especially when they are taking war contracts, to keep prices as low as possible. [Interruption.] There may be some people who think that, because new techniques have enabled us to control prices and to maintain orderly distribution, inflation of incomes no longer matters. That is a fallacy. The more incomes are out of line with prices, the more it is necessary to intensify the most inconvenient forms of control. We all hope to see the end of rationing and other controls as soon as we safely can. We must make certain that, in the meantime, the volume of money incomes is not so swollen that the removal of controls would be attended by violent price inflation.