CHAPTER IX

PROFITS, BAD TRADE AND UNEMPLOYMENT

If we look at the amounts of profit assessed under the income tax during the last fifteen years we are struck with the steady growth of the figures:—

GROSS PROFITS ASSESSED TO INCOME TAX

1893-4 £673,700,000 1894-5 657,100,000 1895-6 677,800,000 1896-7 704,700,000 1897-8 734,500,000 1898-9 762,700,000 1899-1900 791,700,000 1900-1 833,300,000 1901-2 867,000,000 1902-3 879,600,000 1903-4 902,800,000 1904-5 912,100,000 1905-6 925,200,000 1906-7 943,700,000 1907-8 980,100,000 1908-9 1,010,000,000

These figures have been widely quoted, and with reason, as indicative of rapidly growing prosperity. We see that the gross assessment to income tax has actually grown by over £336,000,000 since 1894. We could have no better proof of the growth of the national product which is divided up amongst us.

There is but one set-back in the table. It occurred in the year 1894, when the total gross assessment fell by £16,600,000, and the assessment under Schedule D (Trades and Professions) fell by £16,000,000. This fall, of course, was only an apparent one caused by an alteration in the limit of exemption. Since that date there has been remarkable growth. Since "Riches and Poverty" first appeared (1905) the growth has proceeded very rapidly indeed.

It is of interest to inquire into the movement of wages and employment during these years of remarkable prosperity. Did wages rise and was employment constant?

In "Riches and Poverty," edition 1905, pp. 99 _et seq._, I wrote:

"Let us take some typical trades, and examine the rates of wages paid in these years of rapidly increasing profits.

"The figures about to be quoted are those collected by the Labour Department of the Board of Trade.

"London carpenters in 1894 were paid 9½d. per hour. In 1897 the rate rose to 10d. and in 1903 to 10½d. In Birmingham in 1894 the rate was 9d. and in 1903 9½d. In Belfast the rise between 1894 and 1903 was from 7¾d. to 8½d.

"Bricklayers' labourers in London were paid 6½d. per hour in 1894 and 7d. in 1903. In Manchester the rate remained constant at 6d. per hour. In Birmingham there was a rise from 6d. to 6½d. Masons' labourers in Glasgow have been paid since 1894 a constant rate of 5½d.

"Turning to coal-hewers we get some considerable changes, which are best shown in tabular form:—

NOMINAL DAILY EARNINGS OF COAL HEWERS 1894-1903

|| | | Sth. Staffs. | ||Northumberland.| Durham. | and East | West || | | Worcestershire.| Scotland. || _s._ _d._ |_s._ _d._| _s._ _d._ |_s._ _d._ 1894|| 5 9 | 5 5 | 4 8 | 6 0 1897|| 5 0 | 4 11 | 4 4 | 4 6 1900|| 6 0 | 5 10 | 4 8 | 6 3 1901|| 7 9 | 7 5 | 5 0 | 8 0 1903|| 6 0 | 5 10 | 5 0 | 5 9

"In the ten years there has been a considerable variation, but the high rates of 1901 were brief in duration. Coal-hewers' wages have now gone back almost to the level of 1894.

"Engine fitters in London earned 38s. in 1894 and 39s. in 1903. In Birmingham and Manchester the rates rose from 34s. in 1894 to 36s. in 1903. In Newcastle there was a greater rise in the same period, from 31s. 6d. to 36s.

"Ironfounders in London obtained 38s. in 1894, 40s. to 42s. in 1900 and 40s. in 1903. In Manchester the rates were much the same. In Birmingham 36s. was paid in 1894 and 38s. in 1903.

"Compositors in London were paid 38s. in 1894 and 39s. in 1903. In Manchester the rate remained constant at 35s. In Glasgow the rate remained constant at 34s.

"Agricultural labourers in the Eastern Counties obtained 11s. 1d. per week in 1894 and a gradual increase to 13s. 1d. in 1903. In the North near coal there was a rise from 17s. 5d. to 18s. 4d. In the Midlands 13s. 5d. was paid in 1894 and 14s. 6d. in 1903.

"Textile wages are best expressed by an index number. Taking the rate of 1903 as 100 the rate paid in 1894 was nearly 95 per cent. of that of 1903. This increase refers to cotton spinners and weavers and linen and jute operatives taken together.

"A mere recital of the foregoing facts is sufficient to show that the rise in wages in 1894-1903 was at a much lower rate than the growth of profits in the same period."

Revising this work for 1910, I regret to say that the changes in the above-quoted rates have been so few that it is not worth while to rewrite what I set down five years ago. Wage rates have been almost stationary in the interim, and the changes that have been made in the above figures are too insignificant to be worth recording.

The matter is best dealt with by setting out the Board of Trade wages index numbers. In the important table on page 112 I have contrasted the representative wage index numbers prepared by the Board of Trade with index numbers representing the gross assessments to income tax. In a similar table in "Riches and Poverty," 1905 edition, I did not take into consideration the growth of the number of income tax payers. In the present calculation I have assumed a growth of income tax payers of 10,000 a year throughout the period, which must be very near the truth.

It will be seen that, representing the profits of 1900 by 100 and calculating the profits of other years as percentages of 100, the total profits index number rises from 86.8 in 1893 to 112.5 in 1908.

The wages are treated in the same way, the rates of the years before and after 1900 being expressed as percentages of the rates of that year. It will be found that the index number expressing the unweighted average of the building, coal-mining, engineering and textile trades, and agriculture rose from 90.1 in 1893 to 101.0 in 1908.

It is a striking contrast:—

PROFITS AND WAGES CONTRASTED (From Table on page 112).

Profits. Wages. Per cent. of those Per cent. of those of 1900. of 1900. 1893 86.8 90.1 1900 100.0 100.0 1908 112.5 101.0

It should be remembered that the income tax assessments are largely made upon the average of the profits of the three years preceding the year of assessment (see Chapter 21), and that the income tax has been better collected in recent years, but even when allowance is made for this the figures remain remarkable.

The table does much less than justice to the growth of profits, for this reason. As will be seen by the table on page 37, the growth of income tax payers has been chiefly in the region of small salaries, which (see p. 36) average about £200 a year. The addition of 10,000 income payers at £200 a year adds but £2,000,000 to a year's aggregate assessment. But the addition of 10,000 £200 income tax payers in a year, little as it adds to the aggregate, waters down the average income tax income (col. C, p. 112), and so lowers the Profits Index Number. If one could separate the small salary earners from the table, _profits would show a much more decided growth_, considerable as is the rise in the index number as modified by the small fry.

On the other hand, the Wage Index Number deals with certain trades—mining, textile, engineering, building, agriculture—which have certainly gained more in wage rates in the period than a great mass of labour outside the groups named. Therefore, while the Profits Index Number minimizes the growth of profits, the Wage Index Number exaggerates the growth of wages as a whole. On the latter point, see