276 . REPORTS ON THE STATE OF SCIENCE, ETC. 
or likely to be taxed are either not included at all or play a comparatively 
small part in the indices of price-changes on which wage-changes are based, 
(2) that the proportion of taxpayers affected by such arrangements is still 
comparatively small; I should not imagine, therefore, that any weighty argu- 
ments against the continuance or increase of indirect taxation could be founded 
upon these considerations.’ 
Sir Edward Brabrook replies: ‘The cost of living is not the only or the 
principal element in the determination of the rate of wages.’ 
Dr. Dalton writes: ‘I am not sure that I understand the first part of the 
question. Evidently, if the prices of certain commodities, which enter into 
the cost-of-living index-number, are raised by taxation, and if wages and 
salaries are linked to the cost of living by means of a (proportionate) sliding 
scale, the effect of these taxes on wages and salaries will be neutralised. But 
(a) tobacco and alcohol are not included in any British cost-of-living index- 
number; (6) the difficulty, if there is one, works both ways, for if the prices 
of tea, sugar, &c., were reduced by remission of taxation, wages and salaries 
on a simple cost-of-living sliding scale would also be reduced; (c) the difficulty 
can easily be got over, as in some recent wage arbitrations, where money wages 
based on the cost-of-living index-number had been reduced by an allowance for 
a typical wage-earner’s contribution to national taxation. 
‘The principle of making wages and salaries rise (and fall) with the cost 
of living is not, in any general sense, ‘‘valid.’? But it is convenient as a 
means of reducing unrest and wage disputes during periods when the price-level 
is undergoing rapid changes chiefly due to monetary causes. In effect, wage- 
bargains are made, not in terms of money, but in terms of purchasing power, 
ana during such periods the revisions required in real wage-bargains will be 
smaller, and therefore more easily brought about, than the revisions which 
would be required in money wage-bargains. Compare the present state of the 
railways, where money wages move on a sliding scale, with that of the coal 
mines, where they do not.’ 
Mr. Pethick Lawrence, dividing the question into three, says ‘No’ to (a), 
“Yes’ to (¥), and ‘ Yes’ to (c). ‘For small salaries, so long as there is a 
margin of taxable capacity elsewhere, but as the salary rises it should not 
completely apply.’ Sir J. C. Stamp replies: ‘To some extent. The principle 
is not wholly valid. It is true that wages should rise and fall with prices, 
but not to an equal extent or range—only enough to preserve the proportion 
of the actual total volume of production as the reward of any single service. 
So far as prices are up because production is 20 per cent. down, then real wages 
should be 20 per cent. down—i.e. money wages should rise only to 80 per cent. 
of the price-rise.’ 
Mr. Mason says ‘Yes.’ Mr. Bernard Shaw replies: (a) ‘It depends on 
whether the employees are productive or not. Two postmen and a coster- 
monger will yield as much indirect taxation as two costermongers and a postman. — 
But if you substitute sinecurists or soldiers for postmen, taxation on their — 
consumption is illusory. (6) In the case of subsistence wages, Yes, obviously. — 
Necessity is always valid.’ i 
Mr. Allen writes: ‘In my opinion the ‘‘ principle’? ought never to have : 
been accepted. Surely it is hardly possible that any large section of the 
population should be able to maintain their pre-war standard of living during — 
a really big war? It is no less evidently unfair that a second section of the 
population should have to sacrifice their lives, and that a third section should — 
have to sacrifice a large part of their income while the first section makes no — 
sacrifices at all. No doubt there are people on the margin of subsistence who — 
cannot be asked to give up their bare necessities of life, unless the country — 
is in a state of siege. But they may be asked to work harder. In any case 
it seems most inequitable, as well as politically inexpedient, that Government 
employees should have enjoyed (a) special exemption from military service and 
{b) war-bonus additions to their wages and salaries. At the present time there 
is much resentment among other wage-earners and salary-earners over the 
favoured position of Government employees.’ . 
On this Sir J. C. Stamp comments: ‘The principle is perfectly valid, see 
above, if it doesn’t connote extent.’ 4 
