Chapter 22 from: J.J. Ray (Ed.) "Conservatism as Heresy". Sydney: A.N.Z. Book Co., 1974

Cutting Up The National Cake


In an excellent essay on the problems of Western governments in the journal Commentary, Professor Wildavsky makes the simple observation, 'We are all, in fact, doing better and feeling worse'.

It is ironic indeed that just when it becomes trendy to say that we need not be so concerned about economic growth, there is an unprecedented outbreak of material demands from all sections of Western societies. Never before has there been such a scramble for personal economic improvement, as evidenced in the long hours people are working, the proportion of households taking second jobs and of course the spiralling demands of wage and salary earners. There is a new harshness to the business of dividing the national cake.

Ideological knee jerks

Perhaps there is nothing more destructive a government can do than further misplaced feelings of deprivation among one section of the community. It is difficult to know just what motivates government spokesmen when they champion one supposed class of 'wage-earners' against the rest. It may be the ploy of playing the politics of the numbers game, and being on the side of the many against the few. It may be just an ideological knee-jerk reaction born of years of Labor politics. But it would be very worrying if they really believed their propaganda, about wages being a sadly declining share of national income.

It is possible to go to great lengths with the national income statistics, making different adjustments for different legitimate purposes and to choose different base and end dates and to come up with a perplexing variety of percentages. The crude figures on wages and salaries as a proportion of gross domestic product show a rise over the last twenty-five years-from about fifty-four per cent to sixty-two per cent. That, of course, is only the beginning of an argument about income shares. It can be said that there have been structural changes in the economy with the sectors employing few wage and salary earners declining (farming, small shops, etc.) while those employing a large proportion (the financial institutions and government bodies) have grown. Certain sectors of the economy can be left out of calculations and statistical weighting techniques applied to the data, giving different answers to the question about changes in income shares.

The worker share

This is precisely what a much quoted officer, Mr Tilling, in Mr Clyde Cameron's Department of Labor in Melbourne, has been doing. Tilling's statistical work on income shares is in a draft paper entitled 'Labor's Share in National Income,' for the Department of Labor.

Cameron has quoted the figures which suit his case about the plight of the working classes, but quoted them completely contrary to the conclusion reached by Tilling. Open government may not extend to official publication of Tilling's findings, but a leaked version of Tilling's paper states in its conclusion:

'The evidence appears to generally support the hypothesis of long-run stability in distributive shares. The gross functional distribution of the national product has not changed significantly in favour of either labour or capital since 1953-4. Between 1948-9 and 1953-4 there was a clear decline in the share of wages and salaries in national income. Farm income spiralled upward, because of a very rapid rise in commodity prices: There was an equity case during that period for upvaluations of the Australian currency to distribute the benefits more broadly.' There can be no question but that there was a definite decline in that period in wages in relation to national product. But if the extraordinary Korean war boom is left out and the series examined from then onward, Tilling, after all his statistical analyses, concludes there is no significant long-run movement up or down, although of course there are fluctuations year by year.

The real facts

Tilling's draft paper is also worth quoting on another point: 'The conclusion (of stability in income shares) is not without importance from an industrial relations viewpoint. Recently many trade union leaders have expressed the view that labour's share has fallen over the past quarter of a century. This attitude may have had a not insignificant effect on the level of industrial disputation in recent years. It is hoped that the evidence submitted in this study will enable a better appreciation of the facts of this question.'

This chapter originally appeared as a column in "The Bullettin", 10 November 1973, p. 72.

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