The Cost of Living Index

A correspondent writes to point out that the cost of living index figure issued by the Ministry of Labour is inaccurate, “yet,” he says, “it is around that figure that Trade Union officials weave their settlements.” As he does not give details of his criticism of the accuracy of the figures, it is a little difficult to go into the question. It must, however, be conceded that the cost of living index figures can only be described as inaccurate if it can be shown that they fail to tell us what they claim to tell. No evidence has ever been brought to show that they are “faked,” and it is not the least bit likely that they are. The claim made for them is that they “are designed to measure the average increase in the cost of mantaining unchanged the pre-war standard of living of the working classes …. The effect is to obtain approximately the average percentage increase in the cost of maintaining the pre-war standard of living in working-class families” (Ministry of Labour Gazette, February, 1921). Now it is exceedingly difficult to discover how closely the figures approximate to the real position. The Labour Party some years ago set up a commission of enquiry which satisfied itself that the index understates the real average increase in the cost of living of a working-class family.

While many statisticians take the view that the error is in the direction of overstatement. One difficulty is that many items of the present working-class budget were absent from the pre-war budget, and vice-versa. Again, the relative position of different sections of the working-class has changed; so-called “unskilled” workers are somewhat better off, and many “skilled” workers considerably worse off than in 1914. Also, it must be remembered that the figure is an average figure. The figure is not invalidated by showing that in certain areas or for certain groups it is too high or too low. Since it is based upon the assumption that workers live in “controlled” houses, it will fail to give a true picture of those workers who have to pay higher “decontrolled” rents.

The real point in the criticism centres round the use that is made of the Index Figure in wage agreements, and here, we think, our correspondent in ascribing to the Index Figure something which is, in fact, due to the political backwardness of the workers, and to the hard facts of the capitalist system. It is not the cost of living; figures which compel the engineer, or the miner, to accept wages which leave them poorer than in 1914. It is the ability of the employers to get all the labour they require without paying more for it than they do. If they needed considerably more miners or engineers, they would doubtless have to pay higher wages to get them, Index Figures notwithstanding. On the other hand, some groups of workers are getting a higher real wage than in 1914, due to changes in the demand for their particular kind of skill. In the long run these discrepancies tend to disappear, but, in the meantime, Index Figures are not the dominant factor in securing or preventing wage increases or decreases. It is true that most workers and their leaders, are saturated with capitalist economic theories, which teach them that they should be content to accept the existing or the prewar distribution of wealth without demur, and they accordingly come to look upon the cost of living Index as a kind of divine indication of what wages ought to be, but this is the fault not of the figures, but of the workers who use them so. If they accepted the Socialist view that receivers of unearned incomes are parasites, they would not allow innocent figures or ignorant Trade Union officials to stand between them and the overthrow of the capitalist system.

Ed. Comm.

(Socialist Standard, May 1927)