F.— ECONOMIC SCIENCE AND STATISTICS. 133 



pointed out above, an adjustment to the varying capacit)' of different 

 groups of workpeople to resist reductions or exact advances. 



This post-war disregard of unemployment in wage negotiations is 

 the principal and direct explanation of the loss of plasticity in wage- 

 rates. It should be noted, however, that the provision of unemployment 

 relief is not the only cause of the change. We have already come across 

 another reason for it in connection with the cotton industry. The repre- 

 sentatives of the wage-earners, quite rightly in many cases, believe that 

 any concession on their part would be unavailing. The post-war de- 

 pression in many industries is so much deeper and more widespread that 

 any practicable reduction in wage-rates would hardly afEect it. The 

 example of the coal industry, in which a substantial reduction in wage- 

 rates has been followed by increase in unemployment — and in losses by 

 the employing firms— is pointed to as evidence of the futility of wage- 

 reductions ; and no attempt is made to gauge the extent to which demand 

 is as inelastic for the products of other industries as it has proved to be 

 for coal. 



There is an explanation for the wage-earner's attitude in yet another 

 change ; wage-rates of direct labour never were the sole determinant of 

 costs, and to-day they are probably less important than before the war. 

 Loan charges, incurred in the boom and subsequent slump, although in 

 process of liquidation, are still proportionately much heavier than before 

 the war ; rates and taxes and social insurance contributions are much 

 heavier ; indirect costs, which may be due to the level of wages, but not 

 of wages in the industry concerned, for transport, financial services, etc., 

 are higher ; distributing costs have increased disproportionately. Hence 

 the wage-earner, asked for concessions, fears that he is being asked to 

 make a sacrifice, not to revive trade, but to lessen the losses, or increase 

 the profits, of retailers, banks, loanholders, railways, and co-operating 

 industries, that may be more prosperous than his own. The considera- 

 tion of wages is purely sectional, industry by industry and trade by trade ; 

 the need of industry, so far as wage-adjustments can meet it, is for an 

 all-round reduction, which will affect the indirect costs, simultaneously 

 with the direct costs, of every industry. No machinery exists for such 

 co-ordinated and synchronised adjustment ; on the contrary, the extension 

 of collective bargaining has probably intensified and extended the influence 

 of this sectional outlook of industry by enabling industries, that before 

 the war could not have resisted the pressures imposed by general trade 

 depression, to hold up wages. 



The general relations of wage-rates to other prices and to employment 

 are also significant of maladjustment. Professor Bowley's new index 

 number of wages shows an advance (at the end of 1928) of 94 per cent, 

 over the pre-war level, while the cost of living, as measured by the 

 Ministry of Labour's index, has risen only 67 per cent., wholesale prices, 

 as measured by the Board of Trade index, only 38 per cent, and the 

 average price of British exports only 61-8 per cent. Wage-rates on the 

 whole have been remarkably stable since 1922, although unemployment, 

 as measured by the registrations under the unemployment insurance 

 scheme, has fluctuated from over 17 per cent, in 1922 to less than 10 per 

 cent, in 1924, rising again to over 12 per cent, in 1925 (to 14-6 per cent. 



