Finance and Industry: Payroll tax; Automation

Chancellor’s Pay-roll Tax

In the budget earlier this year the Chancellor of the Exchequer announced that he would get power to levy a Pay-roll Tax to be used, when he thought fit, as a means of encouraging employers “to use more labour-saving machinery” and seek ways of cutting down the number of workers they employed. The amount proposed is 4s. a week for each worker, the tax to be paid by the employer.

It had a very hostile reception, not only from the Opposition but from many Conservative M.P.’s and employers. Nobody seems to have remembered that a “Keynesian” scheme very similar to this was agreed by the three political parties in the war-time national government and set out in a document called Employment Policy, which was to be the blue-print for maintaining full employment and for preventing prices from rising. It was to be operated by making workers and employers pay higher national insurance contributions when unemployment fell to a low level, and lower contributions when unemployment increased. The idea was that if demand for consumer goods fell and unemployment increased, reducing the national insurance deduction would encourage more spending: and if demand for consumer goods increased too much, some of the spending would . be halted by levying higher contributions. The suggested range was from a top-rate of 10s a week (workers 5s. 6d., employers 4s. 6d.) to a lower rate of 5s (3s. and 2s.).

Like many other plans it has never been used, so we have no factual evidence to show what result it would have had.

Discussion about the proposed Pay-roll Tax has however produced some interesting information about developments in industry that have been going on and would presumably be stimulated by such a tax. A contributor writing to the Financial Times (8/7/61) states that in the engineering and building trades there is an increasing tendency for work to be done by small contractors without any direct employees themselves:

“There are in the engineering trades today thousands of one-man firms or small companies where the entire labour force consists of directors and which have no pay-roll at all. These firms produce drawings or tools on a free-lance or sub-contract basis for the larger organisations. In the building trade there is a growing tendency for the craftsman, plumber, mason or joiner to employ himself and hire his labour out to the small builder who again may have no pay roll at all.”

Impetus has been given to this by the development of small electrically driven machines which can be set up in home workshops and he says that on the Continent the idea has been extended to the point of operating a factory on the basis that the workers come in as self-employed master-men, hire the machines and sell the products to the management without any wages relationship. As the contributor points out, a pay-roll tax levied on the number of workers directly employed would be avoided by these methods.

Notes on Automation

Six years ago in these columns (September, 1955) the opinion was expressed that automation would not develop in this country as quickly and extensively as many people were claiming. It is interesting to look at some of the trends to see what has happened since then and is likely to happen. The prevailing mood of comment today is one of caution, allied with disappointment about the results of automation so far. Often there is contrast with the progress made in other countries, especially America.

Mr. F. Griffiths of the British Motor Corporation writes that in the motor industry “the pattern of automation . . . still remains mainly in the machine shop. Basic processes, such as the foundry and the forge have not yet been given any consideration to enable real automation to be installed.” (Electronics and Automation Supplement to the Financial Times (23/1/61). Mr. Griffiths lists the many technical and organisational problems that need to be solved before automation can become general in the motor factories. A scientific correspondent in the Financial Times (8/1/60) estimated that it might be 1965 before this development was completed.

In the field of electronic computers for commercial purposes, experience has been mixed. According to a correspondent writing in 1959 (Financial Times, 2nd April) many firms that had bought computers for commercial purposes bad found them a failure from the financial point of view. But in the engineering and scientific fields “there have been equally remarkable successes.”

And while automation and electronics manufacture have rapidly grown to “big business,” employing nearly a quarter of a million people, there aren’t enough orders for the home market and according to a report in the Times (29/11/60) almost every firm in the business is losing money on its manufacture of data processing equipment.

As regards the total numbers of workers employed, the process of automation in the past six years has had little effect, either in manufacture or in offices, though clerks in banking and elsewhere are becoming increasingly worried about the future, especially on promotion prospects. In factories and offices shift working and night work will increase.

With government encouragement, designed to prevent industry in this country falling behind its competitors, automation and similar innovations in factories and offices will develop at an increasing pace, but none of those who sweepingly claim that automation brings about enormous economies in labour and materials (productivity up tenfold, costs reduced 25 per cent. to 40 per cent—Financial Times, 8/1 /60) have explained why automation so far has had so little impact here or in any other country.

Why have not these alleged savings of labour shown themselves in falling prices? The answer in most instances is that even when the labour-saving is as high as stated it is effective only in a small part of the total process of production. If labour is reduced by say 40 per cent in processes representing a quarter of the total factory operation, the average for the whole factory operation is 10 per cent, and if production and transport of materials is not affected the overall reduction from start to finish may be less than 5 per cent And this leaves out of account the, sometimes, greatly increased amount of labour needed for production and maintenance of the automation plant.

Living in one room

Workers having a hard time in the country of their birth find it easy to accept travellers’ tales about the summer weather and the “gold paved streets” in some other part of the globe. Governments all try to counter these beliefs because they encourage discontent

Recent observers from both sides of the “curtain” have been commenting on housing conditions in Britain and Russia. First, we have Mr. Yur Fokin, a Russian broadcaster, who wrote in the Daily Express (13/6/61) giving his eye-witness impressions of this country. Mr. Fokin said he was surprised to notice in London “sharp differences in the type of districts where people of different classes live.” He said it was very strange to Russian eyes because “in Moscow, for instance, there is no class distinction.”

As it happens an Englishwoman. Mrs. Reita Ovsyannikov, married to a Russian, has just returned to this country after thirty years in Russia. In her article in the Sunday Telegraph (9/7/61) she notes the contrast that Mr. Fokin did not see. She writes that “even to this very day, most Russian families have to make do with one room,” but because her husband belongs to “the managerial class” and she also had a highly paid job: “We enjoyed a far better standard of living than the great majority of Soviet citizens. For the last ten years of our life in the Soviet Union we had a flat of our own, a car, and all the money we needed. It was not luxury by Western standards, but we were comfortable.”

Many visitors to Russia have commented on the large number of families compelled to live in one room and nobody, not even Mr. Fokin, believes that Krushchev and the other V.I.P.’s or the “rouble millionaires” live in one room. Mr. John Cole (Guardian, 7/6/61) also noted “the very limited living space compared with that expected by English families,” but he described the comparison “misleading” because “The Russians like the Swedes and French attach less importance to homes than the English.” The implication is that “Russians” and Swedes and French don’t mind living in overcrowded conditions. If this is so, why doesn’t Mr. Krushchev live in one room? And why was the Englishwoman quoted above glad to be able to afford not to?

The truth is quite simple. It is nice to be rich in any country and if you are rich you don’t have to put up with the conditions suffered by the poor: which includes the Glasgow home visited by the Queen on 30th June—a man. wife and four year old son living in one room.

Not belonging

The double-talk of politicians, newspaper editors and business men is sometimes so odd as to be hardly comprehensible. as witness an editorial in the Daily Mail on 1st July.

Just about the time that there was an “unofficial” strike at Ford Motor works called by the shop stewards, the firm’s chief medical officer was at a conference on automation telling the delegates the secret of “good labour relations.” He said that “all employees need to have a feeling of belonging to the company,” each one “must feel he counts as a person.

These events inspired the leader writer of the Mail to try to explain to the Ford workers what is the true shape of things:

“The war cry of one of these shop stewards is worth recording. “Nobody here”, he shouted, “wants to see the Ford Motor Company win.“
But who and what is the Ford Motor Company if it isn’t the 20,000 workers he was talking to? Are they not as much the Ford Motor Company as Mr. Ford himself, or any of his directors or executives?”

Of course, legally the Ford Motor Works and all its properties belong to the company, in effect the shareholders, to whom also the £18 million profit in 1959 belonged. And last year when the American Ford company bought out the 45 per cent, of the shares that they did not already hold, for £129 million, they paid the money (£7 5s. 6d. per share) to those shareholders. The English company now therefore belongs wholly to the American Company. The 20,000 Dagenham workers who, according to the Mail are the Ford Company as much as Mr. Ford himself, weren’t even asked whether they wanted the sale to go through, much less paid for handing over what the Mail thinks is their own company.

And is it surprising that the strikers wanted to win their wage-claim? They no more wanted to see Fords win than the Ford’s management wanted to see them win. The strikers and the management both see plainly that there is a conflict of interests between them.

Which brings us to the firm’s medical officer who worries because the workers don’t feel that they belong. Why has it not occurred to him that perhaps that is just what irks the workers at Dagenham and elsewhere? They feel very strongly that they are treated as if they do belong to the firm, as if they were part of the equipment, along with the machines and trucks and typewriters; instruments for making profit.

If the medical officer ever happens to meet one of the Ford family or other owners he should watch them closely to note if they, too, suffer from any feeling of frustration or sense of. “not belonging.” Then the secret will be revealed to him. He will find that they “belong” all right, because Fords belongs to them.

Mr. and Mrs. Henry Ford might also tell him more about the £100,000 they spent recently on a party for their daughter (reported in the Sunday Telegraph, 25/7/61. Just one daughter, one party, one hundred thousand Pounds.


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