The keys to Labour's employment promotion policy were higher personal incomes and expenditure, together with extended public works and housing programmes. The Finance Act 1936 restored public service salaries and the wage rates payable under awards to those prevailing before May 1931, when the first 10 per cent cut on wages had been made under depression conditions. Other wages were to follow suit. By 1937 wage rates, as measured by the Nominal Wage Rates Index, were 21 per cent above the 1935 average.
Various types of monetary provision made by the State were also increased and the range of benefits extended. Pension payments increased steadily from £3·3 million in the year ended March 1935 to £6·8 million in the year ended March 1939. In the following year, augmented by new Social Security provisions, the total of page 7 pensions and Social Security payments moved to £12·3 million and in 1940–41 was to reach £14·3 million, which was well over four times the 1935 level.
The numbers of men engaged on public works projects increased rapidly from under fourteen thousand in January 1936 to over nineteen thousand in January 1937.
It is true that, in the early stages, the Labour Government concentrated on transferring men from subsidised employment and part-time employment to full-time public works jobs. For example, highways and road works being carried on at the instigation of the Unemployment Board were transferred to the Public Works Department as from 1 April 1936.
An interesting sidelight on this is thrown by remarks made in September 1936 by Minister of Works Robert Semple:1
‘I was quite prepared to find, owing to several years of financial depression, that there might not be a settled policy and I make due allowance for such difficulties, but I was not prepared to find that the whole of the public works activities had been converted into a system for relief of unemployment.’
Earlier Mr Semple had given a more detailed report. He said:2
‘When I assumed office approximately twelve thousand men were employed, the majority of them being relief workers. The complement today is sixteen thousand men, and when the full programme is in active operation I anticipate considerably increasing the number, even with the introduction of much more plant than is now in use. The existing practice of men for public works being sent direct to the Public Works Department by unemployment bureaux in the different centres, and without any regard whatever to their fitness for the work or their capabilities, will cease; in fact, a reclassification on the existing jobs must be done.
‘…Practically all of the works which have been carried out by the Department for several years have been classified as relief works, and the basic rates of pay have been 12/- per day for married and 9/- for single men. Under the new agreement all works will in future be classed as standard works, and the basic rate of pay for labourers will be 16/- per day and single men will receive the same rate of pay as married men.’
In spite of the prominence given to these transfers of status, often amounting to a reversal of what had been done in depression years, much of the expansion represented a genuine extension of works activity. Moreover, it was associated with mechanisation and page 8 labour-saving methods, so that more than ever before was being achieved by the use of labour. In the next two years there was a further steady rise in numbers employed, to reach 22,800 in January 1939, but then a slight fall took the figures back to 21,200 in January 1940, four months after the outbreak of war.
While the Labour Government placed reduction of unemployment high on its programme, the employment promotion aspect of public works was, in the immediate pre-war years, overshadowed by a vigorous policy of improvement of highways, land development, school buildings, aerodromes and other works using the best available equipment.
Chart 2 shows public works employment from 1935 to 1940.
Public works expenditure which, under depression conditions, had fallen from a level of about £8 million a year to under £2 million in the worst depression year, 1932–33, showed no notable recovery until 1936–37 when it increased to over £4 million. It moved to £7 million in the following year and to over £10 million in 1938–39, taking it above pre-depression levels for the first time. Not unnaturally the Government's public works programme page 9 required considerable administrative planning and could not be accelerated rapidly. The housing programme took even longer to gain momentum.
Economic recovery was assisted in the first two years of Labour's term of office by increases of £10 million a year in export earnings. The next two years were not so satisfactory. Export earnings fell and, for 1938 and 1939, stayed £8 million below their 1937 level. Though still £12 million above what they were in 1935 when Labour took office, they were inadequate to pay for the rising cost of imports. The depressive influence on farm incomes was alleviated to some extent by the fact that guaranteed prices held up dairy incomes in 1938–39. This was the first year when guaranteed prices acted as an appreciable offset to the effect of overseas price falls.
The Employment Promotion Fund, after paying out about £4 million a year for each year from 1932–33 to 1937–38, spent over £6 million in 1938–39 and it was not until the first year of war that payments fell below £3 million. Employment promotion was necessary and costly up to and after the outbreak of war.
1 NZPD, Vol. 247, p. 198.
2 NZPD, Vol. 245, p. 144, 14 May 1936.