[36] J. N. Stockett, "Arbitral Determination of Railway Wages," pages 165-6. See also account in Lord Askwith's "Industrial Problems and Disputes" of the influence of customary differentials upon wage movements during the war, pp. 400-26.
[37] Page 232, Vol. II (1918-19), S. Aust. Ind. Reports, The Furniture Trades Case.
CHAPTER V—WAGES AND PRICE MOVEMENTS
Section 1. The transactions of distribution arranged in terms of money. How does this affect the outcome of distribution as regards wages?—Section 2. The characteristics of price movements.—Section 3. The direct and indirect effects of upward price movements upon the distribution of the product.—Section 4. The direct and indirect effects of falling price movements upon the distribution of the product.—Section 5. The doctrine of the "vicious circle of wages and prices" examined. Its meaning and importance.
1.—Up to this point the investigation of the forces which govern wage incomes has proceeded with only the most incidental acknowledgment of the fact that the whole series of processes which is described as production and distribution is performed with the aid of a monetary system. Production entails a constant comparison and calculation of money values. The transactions of distribution likewise. How does the intervention of a monetary system affect the outcome of distribution? How does it modify the share of the wage earners in the total product of industry? The subject of prices and price levels is one of the most difficult of economic subjects. However, our purposes do not require any inquiry into the general theory of the subject. It will suffice for us merely to recognize the existence of different types of price movements, without investigating except at particular points the conditions which govern them.
2.—It is common practice to use the term "price level" to denote the position of prices of commodities in general. The price level is never anything more than the concept of a collection of prices of particular commodities. It is convenient to be able to express the position of this collection of prices by a single figure. To do this, use is made of various statistical devices by which this collection of prices can be combined into one price—which will be statistically representative of the collection. That single figure is known as the Index Number of that collection of prices. Changes of the Index Number represent changes in the position of the collection of prices from which it has been statistically derived.
All price changes are changes in the prices of particular commodities. Of course, a change in the price of one commodity may produce a change in the prices of other commodities. Relatively small and occasional changes in a few, or even in a great many of the prices which make up the price level, have no importance for the problem of wages. Indeed, if the price level remained nearly stationary there would be no necessity of undertaking this investigation of the effects of price change upon the distribution of the product. However, large and protracted changes in the price level do occur, and these are genuinely important factors in the distributive outcome.
A study of the major price movements of the past makes clear the chief characteristics of these large and protracted changes in the price level. They are irregular changes. That is to say, all of the individual prices which make up the price level do not change at the same time, nor to the same extent. Certain prices may even change in opposite directions.[38]