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Salient. An Organ of Student Opinion at Victoria College, Wellington, N.Z. Vol. 13, No. 10. June 1st, 1950



So we find that in all spheres the cost of production will rise because the basic cost of labour will rise. While it is certain that a very large percentage of business firms are capable of meeting this most modest increase in costs out of profit, it is equally certain that in Free Enterprise Planless Capitalist Society they will not be required to do so and in fact will be allowed—nay, encouraged—to make greater profits to make allowances for their own increase in the cost of living and to give them greater "incentives" to ....? (increase their profits perhaps?). After all subsidy removal on flour and increased labour costs may cause an increase in the cost of a bun to 1½d, but the actual price will be 1½d. But the public suffers this sort of thing.

Thus throughout the whole economy increased prices will act and react on increased costs. The subsidy on coal is lifted. That together with increased labour charges raises the price of coal ex mine. The removal of the subsidy on freight costs still further will be added to the coal cost. The cost of coal thus raised to NZR still further raises operating costs and must be later met by another cumulative increase in freight or passenger charges. Again this will affect the price of coal among other things, as well as manufactured goods, gas supplied and domestic coal. The merry spiral goes on.

The increased prices on wool—not included in the mythical "4%" cost of living rise will be another example of this spiral effect. So it will 'be with all commodities—even. those seemingly not immediately affected by subsidies.

Will adequate bonuses be granted to all wage and salary earners to compensate for these growing increases? We believe that some increase will be given—perhaps "to the extent of a 7½% wage bonus—but at the same time it seems likely that the final effect on the cost of living of the subsidy removal will be a rise of between 10 and 15%. It is also clear that if there is to be any rise it should be a fiat rate increase of say £25 per year. The increases, whatever they are to be, will of course be further reduced by Social Security tax further Increasing the difference between prices and wages: although at the same time it will pay for the added cost of increasing social security benefits.