The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1920-06-11
PRICES AS RELATED TO WAGES


Those who look forward to a sud-
den, rapid or violent decline in prices
should not lose sight of the fact that
existing prices are based largely on
high labor costs.
Wages, which are unprecedentedly
high now and often the largest single
item in the cost of production, usually
respond less promptly to variations in
commodity prices. In other words,
wages nearly always lag behind COM
modify prices in their movement eth
er up or down. Accordingly, it is to
be expected that wages will not fall
so rapidly as prices. This may be ex-
pected TO retard the decline of prices
thru the, influ, nee of wages on cost of
production.
While the maintenance of high
wages may thus increase the difficult
ties of producers in a period of de-
Ginning prices. on the other hand. the
preservation of the buying power of
the wage-earning classes would pow
erfully reinforce the demand for al
NEST all classes of manufactures and
be an additional factor making for
gradual rather than sudden price re-
cessions
The distribution of the losses. in
consequence of Il ling prices. and con-
traction of profits all alone the line is
the result of numerous influences. 1t
is an axiom in economics that the price
of a commodity already produced is
net directly determined by its cost of
production. including the expenses in
CURED in distributing the commodity
The goods may or may not find a mar
ket at a price to cover this cost of pro-
duetion. If they do not find a mar
ket, the loss may fall nywhere among
the distributors or producers, the in
cidence of the loss depending in part
upon the methods and practices in
vogue in the process OF producing the
goods and placing them with the con-
sumner.
II, for example, producer sell his
product in advance upon the basis of
known costs. he is presumably i'm
mune against loss, so long as the pur-
chaser adheres to his contract; while
on the contrary, if the assembling or
production be undertaken for subse-
quent sale, the producer incurs the
risk of losing in a falling market.
There is such a diversity of prac-
tees in assumins the liability of re-
pudiated contracts and in the willing
ness and ability of individuals to per-
form their contracts. that by no gen
eral rule can the distribution between
manufacturers and merchants of &C
tual losses from falling prices be fore
told. If contracts are strictly honered.
necessarily, distributors, as distinct
from producers, are more subject to
the risk of losses from falling prices
than are producers. because in large
Z part the output of factories is sold in
advance of production. The obvious
lesson from such a situation, is the
suggestion that business men will find
It especially worth while in the com
ing months to conserve their working
capital and to maintain Inventories
that are as highly liquid as possible.
But not all the emphasis should be
placed on caution. The bold and con-
fident business man, who is not daunt-
ed by difficulties, but who carefully
studies all phases of his problem and
dares to act on his well-informed
Judgment, can be counted upon to
make money whether prices fall or
not.
The advantages accruing to consum-
ers in consequence of declining prices
are easily exaggerated and misunder-
stood. Most consumers are, in one
way or another, associated with pro-
/ duction. Falling prices in the main
are accompanied by declining profits
and eventually by lower wages, as well
as reduced cost of living. but the re-
duced income may leave no margin of
gain from the lowering of the cost of
living. Persons with assured and
fixed money incomes are necessarily
benefited by general falling prices, but
not infrequently the so-called fixed in
comes are at the same time rendered
less certain by the declining prices.