THE I.P.A. REVIE1U-INSTITUTE OF PUBLIC

289 Flinders Lane,AFFAIRS — VICTORIA

Melbourne —VictoriaCentral 1249

Vol. V MAY-JUNE, 1951 No. 2

CONTENTS

PageAn Unfinished Task .. ... 33

Comparative Food Costs .... 42

Profits and Progress 43

Graph—Wages and Profits .... 53

Productivity: Key to Plenty .... 54

Contributed Article:"The Problem of Coal" by

K. A. Cameron .. .... 56

COUNCIL OF THE INSTITUTEG. J. COLES, C.B.E. (Chairman).Sir W. MASSY-GREENE, K.C.M.G.Sir LESLIE McCONNAN, K.B.C. A. M. DERHAM, C.B.E., M.C.G. H. GRIMWADE.H. R. HARPER.W. A. INCE.F. E. LAMPE, M.B.E.C. N. McKAY.W. I. POTTER.HERBERT TAYLOR.Hon. A. G. WARNER, M.L.C.

EDITORIAL COMMITTEEG. H. GRIMWADE, M.A. (Cantab.),

B.Sc. (Melb.), Chairman.F. E. LAMPE, M.B.E.HERBERT TAYLOR.C. D. KEMP, B.Com. (Director of the

Institute).G. R. MOUNTAIN, M.A.H. N. WARREN, B.Com., A.C.L S.

(Secretary).

AN UNFINISHEDTASK

PRIVATE enterprise has hidden its light undera bushel for too long. , Business leaders,

in Australia and elsewhere, have been so pre-occupied with harassing day-to-day problems;that many have failed to appreciate the vitalnecessity of encouraging people to understandthe part, that their initiative and enterprise playin the life of the nation. How many peopleappreciate that the modern company has beenbuilt up slowly through the drive, determina-tion and hard work of the founders and thoseassociated with them? How many take forgranted the positive contributions Australianbusinesses have made and are continuing to maketo the well-being of the Australian people? Butthe answer to the critics of capitalism shouldnot merely be a recital of past accomplishments,but rather a plan of action for improving theeffectiveness of our economic system so that itwill yield ever increasing opportunities for moreand more people.

Page 33

AN IJNFENTISEEED TASK (continued)

BUSINESS AND PUBLIC OPINION

Opinion Research Corporation last year conducted an in-teresting survey on Industrial Relations in Australia which wasbased on a sample of 500 interviews with employees, em-ployers and self-employed men.* Although the result of thissurvey could be said to be on the whole favourable to privateenterprise, it does indicate that a great many people have mis-givings or prejudices about business and that there is a re-latively high degree of ignorance among the general publicconcerning industry and commerce.

Some of the more important findings of this survey areas follows:—

An overwhelming majority of employees feel that employers give theiremployees a fair deal; although at the same time the survey revealed thatthe most common faults of employers were that they were too greedy forprofit, displayed a disregard for employees' welfare, showed a lack of co-operation and appreciation and failed to realise their dependence upon theworkers.

About 70 per cent. of the people interviewed said that the publicwould lose if all large businesses in Australia were owned and operated bythe Government.

Opinion, particularly among employees of large firms, leans towardthe belief that profits of big businesses are too large.

In answer to the question, which would you prefer to be employedby—the Government, a big company or a small business?, 37 per cent.said Government, 37 per cent. said small business, and a minority of 26per cent. preferred employment with a big company.

Businessmen have good reason to be worried by suchevidence of lack of understanding by employees and the gene-ral public, because the public attitude towards business isgradually becoming the primary problem of business itself.For as Abraham Lincoln once said: "With public sentimentnothing can fail; without it nothing can succeed." It is truethat if a solution is to be found to this problem, it will, bedetermined largely by what management decides to do aboutit. It is a question of converting a climate of opinion, whichif it is not actively hostile to private enterprise, is not entirelyfavourable; to an atmosphere of consent.• "A Survey on Industrial Relations" published by George Patterson Pty. Ltd_

Page 34

A BETTER UNDERSTANDING

It has been said that while man has brought his physicaluniverse under control, he has failed to manage the simplerelations between himself and his fellows. This is particularlytrue of the vital field of human relationships in industry,and in the relationships of business with government and thegeneral public. Management must apply to its human rela-tionships with the rest of the community the same type ofsearching analysis that it usually devotes to its normal businessproblems. There is great need for businessmen to cultivatethe art of knowing people. And this involves spending agreat deal more thought and time in finding out more aboutthe basic aspirations and needs of men. Too few peoplereally know those who occupy the key jobs in business organi-sations. It is unfortunately true that many businessmen havetended to become remote from the ordinary man. Whereas,the understanding and respect of people can be acquired onlyif businessmen show faith in them through the cultivation oftheir friendship. But many of the speeches, a great deal ofthe advertising and reports made by businessmen will fall ondeaf ears, until people really believe that business is trying tounderstand and is genuinely concerned with their problems.

PUBLIC RELATIONS

Since public opinion is such a powerful force, an exten-sion of the practice of sound public relations is very desirablethroughout Australian business today. In the long run theonly worth while public relations activities are those based on"good performance—Publicly appreciated." First of all, busi-nessmen must do a job that people particularly their employeesand consumers will regard favourably, and then they mustintelligently draw the attention of the public to this good per-formance. Public relations furthermore, involve interpretingthe attitude of the public, employees, shareholders and sup-pliers to the company and using the knowledge gained to earntheir continuing understanding and approval by all means ofexpression.

In 1950, it is estimated that U.S. business spent at least$100,000,000 on an intensive free enterprise public relationscampaign, which does not include the enormous cost of em-

Page 35 FfiRIA3

AN UNFINISHED TASK (continued)

ployee relations expenditure and the time and energies of topmen in U.S. Management. But in the United Kingdom, Aus-tralia and elsewhere the new profession of public relations inthis connection is still in its infancy.

It is interesting to note that of all the countries in theWestern World, U.S.A. is the one where business is most con-scious of the need for public relations; and this, notwith-standing the fact that free enterprise has achieved its mostoutstanding success and is best understood in U.S.A. How-ever, it is the leaders of U.S. business, more than those ofother countries , who appear to be most imbued with the needfor private enterprise to state its case to the people withgreater force and clarity than ever before.

A TWO WAY STREET

The practice of sound public relations involves a two waymethod of communication. It calls for something more thanjust telling employees or telling the public about the factsof industry. With equal importance successful public re-lations depend on finding out what employees, consumers andothers think of business. Briefly, it embraces the art of lis-tening to ascertain the viewpoint of others and the importantmatter of knowing and understanding people.

In an article which may prove to be a classic on the sub-ject, Fortune says trenchantly that a great deal of the expendi-ture of U.S. business on public relations has been wasted, andthat the message has not gone fully across.* What are thereasons for this? Why is mis-information so resistant to in-formation? Fortune in this article which should be widelyread gives two reasons. First, business cannot speak with twovoices and have both believed. Only if there is trust andunderstanding can there be any real communication. Beforeemployees will accept management "facts" they must firsthave confidence in the motives and sincerity of management.In the second place, management in U.S.A. has overlooked theimportance of listening. They have done all the telling, butthey have left it to the other fellow to do all the listening.This says Fortune is the "most fundamental error of the FreeEnterprise campaign." This failure to find out the otherfellow's point of view is largely responsible for the gap be-• "Is Anybody Listening?" vide "Fortune," September issue, 1950.

page 36

tween .businessmen and those with whom they seek under-standing. And by failing to make communication an effectivetwo way street, management has not fully appreciated theemployee's desire for self expression and participation.

AMERICAN EXAMPLE

There is no other country where public relations is sowidely practised and so much in the news as U.S.A. Publicrelations specialists are employed in the United States by busi-ness, government, churches, universities, schools, libraries, wel-fare agencies, economic research organisations, trade unions,newspapers and so on almost ad infinitum. Some of the greatAmerican trade unions are fully alive to the value of expertassistance in their public relations.

One example of this interest in public relations and thepublic policy side of American business is a document knownas the Boston Declaration, drawn up by U.S. business leaders.*In the following phrases these . industrialists display a highsense of social responsibility and a sound appreciation of truepublic relations:

"To this we pledge ourselves:To stabilise employment, by levelling out seasonal peaks and valleys in

production, by diversification of products, and a vigorous search for newmarkets. The best way to prevent unemployment is to produce goods atlower unit cost so that more people can afford them and more employeeswill be kept busy making them.

To create more jobs through research, new facilities, new equipmentand new methods, to keep pace with the needs of the country and itsrapidly expanding labour force.

To keep improving tools and production efficiency, so that the earningpower of the individual will be increased.

To give to each employee the opportunity to develop his abilities,recognising his right to improve himself as he improves the business.

To maintain the healthy competitive spirit that results in new ideasthrough better products and services to the public.

To encourage more widespread investment in common stocks, to theend that more millions of Americans may become owners of industry aswell as employees."

Private enterprise is often accused of opposing changeand firmly abiding by the status quo. But, here is the basis fora forward progressive policy, designed to raise the generalstandard of life and to preserve individual opportunity.• Given on 18th May, 1950 in Faneuil Hall, Boston, Massachusetts and pub-lished in "New England Letter" Issued by The First National Bank of Boston.

Page 37 KOTECTif'

AN UNFINISHED TASK (continued)

Group declarations of this type are a forward step, in-dicating as they do, agreement among business men on im-portant common objectives; but their full benefits can onlybe experienced, provided the job of putting such ideas intopractice is well done. •This is essentially a task for individualbusinesses and companies. Herein lies a heavy responsibilityfor management. It is to the individual business that em-ployees and the public in general must look for the conver-sion of paper objectives and pledges made en masse into practi-cal results, in the form of real and concrete benefits—em-ployee benefits in the form of improved conditions of workand benefits to the public at large through the provision ofbetter goods and services at cheaper prices. This task cannotbe accomplished by organisations or groups of business men;it can only be fulfilled as a result of action on the part of themany individual companies and businesses which go to makeup the whole private enterprise system.

BENEFITS ACROSS A NATION

One of the leaders in the field of public relations inU.S.A. is the• great chemical company, E.I. Du Pont de Ne-mours tic Co. The story of this company is told in a strikingand convincing way in a 52 page illustrated booklet "Thisis Du Pont." Here are some of the headings: Du Pont Tradi-tions; Du Pont Today—Blend of Technology and HumanRelations; Du Pont Geography—a picture map showing thecompany's plants and branches across U.S.A.; Shareholders—Their Savings Keep Du Pont going; Du Pont people—Spin-ners and Salesmen, Carpenters and Chemists, Electricians andExecutives all contribute to Du Pont's and the nation's mate-rial progress; Financial Record—Venture Capital is at theroot of the company's growth and progress; How big areprofits?; The Company's Products—cover a wide range andhelp shape the rising living standard in U.S.; Du Pont Cus-tomers—how businesses large and small are interdependent.

As a result of his mechanical and productive skill theDu Pont employee enjoys a high standard of living. Cars,for example, are owned by 73% of the men in the company,refrigerators by 77%. About half of Du Pont's male em-ployees own their homes. Telephones are to be found in morethan 77% of all employees' homes. Life insurance, in addition

Page 38

to that paid for by the Du Pont company is carried by 89%of the men and 74% of the women. Du Pont devotes sixpages, containing 23 pictures, to its shareholders. Beneaththe photograph of a man with an apron serving behind agrocery store counter, we read, "Typical of the millions ofAmericans who own stock in Du Pont or other corporationsis the smiling gentleman above. He is P. G. Scott, a smallbusiness man who keeps a neighbourhood grocery store inClinton, Iowa. His holdings, like those of the average inves-tor, are small. Like most stockholders, too, Scott dependsfor his livelihood on his daily work; the return from his in-vested savings is a supplementary source of income." About83% of Du Pont's stockholders are individuals. Their careersvary from cowboy to banker, from farmer to housewife, frommachinist to business executive.

And finally in their employee Magazine* Du Pont says:"A big business does not sit in a shining skyscraper . . . it issomething made up of millions—employees, owners, suppliers,customers, consumers and others across the nation—and every-one shares in its benefits . . . In sum, a big business is not a fewindustrialists in a remote citadel; it is people, plants, productsand benefits across a nation." Du Pont recognises that the bestpublic relations consist of actions and policies which are good,and . the advisory work of their public relations departmentis in that direction.

OPPORTUNITY FOR AUSTRALIAN BUSINESS

There are signs that Australian business is slowly awaken-ing to the value of public relations and that the lead givenby U.S.A. has not been allowed to pass unnoticed. During thelast de6de many enterprises have set up personnel departmentsto exercise supervision over human relationships; and sincethe war public relations executives have been appointed in anumber of cases. The annual company report has progresseda long way from the plain, terse document which helped tocreate the phrase "the poker face and sealed lips of Britishbusiness." The tendency in modern industry in this country andelsewhere, where management has largely become divorcedfrom ownership, is in the direction of giving greater recogni-tion to the interests of employees; consumers and the public• "Better Living" Volume 5, No. 1.

Page 39 ,

AN UNFINISHED. TASK (continued)

as a whole. This recognition is now being reflected in en-larged reports which attempt to explain by means of texts,pictures, colour and graphic illustration, a human corporatestory, formerly revealed only in the cold figures of financialstatements. The practice of issuing the same annual reportto shareholders and employees is to commended. For the com-pany report is indeed an important vehicle for public rela-tions and it affords a valuable opportunity for a public com-pany to reveal its role in our society, which is based on privateenterprise. It ought to be one of the means used to showthat the nation, consumers, suppliers of materials, manage-ment, employees and investors all benefit from the enterprise.

A SIGNIFICANT STORY

Private corporate enterprise can confer an immensevariety of benefits on employees. Apart from regular wages,many receive in addition various types of bonuses includingemployee shares and a share in profits; their working condi-tions many be scientifically modern; they may receive tangiblebenefits from retirement plans, housing schemes, medical bene-fits for employees and their families as well, recreation pro-grammes, etc., and the intangible gains accruing from train-ing programmes and service recognition. Some Australiancompanies provide facilities for their employees to build theirown houses, including the preparation of plans, the purchaseof materials wholesale, and the hiring of special tools such asconcrete mixers. Others enable employees to buy refrigerators,washing machines, pianos and similar articles wholesale andsell them to employees at cost, paid for over a period. Notall companies are in a position to do these things, but many ofthem have already been widely adopted in Australia. Themodern company report on this theme can reveal an extremelyinteresting and significant story.

As the annual report must by Statute be sent to the in-vestor owner it is usually assumed that his story is fully told.But who are the owners? What sort of people are they? Whatis their average shareholding? This information has beenlargely neglected in company reporting in Australia and yetit has an important place in the story of enterprise. If shareregisters were analysed and the facts about ownership of shares

Page 40

were widely published by companies, it would do a great dealto remove popular misconceptions about this subject.

Nothing has been said so far regarding employee opinionsurveys, suggestion schemes, joint consultation, employee hand-books, profit-sharing, the desirability of encouraging employeesand the general public to invest their savings in industrialshares and the use of films. But each of these things has ause in establishing effective communication between businessand others. The weapons of public relations embrace thewhole field of persuasion, publicity and opinion research. Thereis great scope for their use in the wider horizon unfolding be-fore Australian businessmen.*

Wisely conducted, and mindful of the opinions of others,public relations may point the way to the common ground ofco-operation and understanding between business and labour,business and consumers and business and government. Ifpublic relations has its limitations, it also has great possibili-ties; for it is indeed part of industry's unfinished business.

Page 41

COMPARATIVE

FOOD COSTS

.....Australia and Overseas

A recent survey of twenty countries bythe U.S. Department of Labor shoulddispel any belief that the cost of food inAustralia is higher than other countries.For each hour's pay Australian workerscan buy more food than workers else-where; even more than the Americanworkers who were next. The statisticsalso show that Australia was one of thefew countries in which there has been asubstantial decline in the cost of food, interms of working time, since before thewar. Australia, U.S.A., Norway, Canadaand Denmark have consistently maintain-ed high levels of food purchasing power.By contrast Soviet workers toil betweenseven and eight times as long as Austra-lians to buy a given quantity of food.

It is extraordinarily difficult to makeinternational comparisons and the follow-ing figures are subject to certain qualifi-cations. For some countries the figuresof hourly earnings are award or minimumrates, whilst for others they are actualearnings. The Australian index is under-stated, particularly in 1950, because it re-lates only to award rates. Heavy foodsubsidies are also important for the Unit-ed Kingdom and Norway. Food consti-tutes less than one third of family ex-penditure in most western countries, andtherefore differences in food purchasing

power, are but one indication of the rela-tive well-being of wage earners in differ-ent countries. For example, the positionof the American worker would be stillhigher, if account were to be taken ofmass produced goods and services, otherthan food.

INDEX OF PURCHASING POWER OF

HOURLY EARNINGS IN TERMS OF FOOD.

(United States 100)

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

• •

Pre-War

• • 92

38

• • 86

• • 26

• • 34

• • 73

• • 49

• • 68• • 51

• • 46• • 29

• • 44• • 52

. • 26• • 45

• • 68

• • 60• • 49• • 24

1950*107

*28

*78

37

*461.*73

*39

*31

38

*62

*27

46

63

*24

*38

*84

*63

46

14

23$

SOURCE: U.S. Department of Labor, Bureau

of Labor Statistics.

*Purchasing power of workers with families is

increased by family allowances.

-I. rationed prices, $ non-rationed prices.

CountryAustralia ..

Austria (Vienna)

Canada ..

Chile ..

Czechoslovakia ..

Denmark ..

Finland ..

France (Paris) ..

Germany ..

Great Britain ..Hungary ..

Ireland ..

Israel ..

Italy ..

Netherlands ..

Norway ..

Sweden ..

Switzerland ..

U.S.S.R. ..

Page 42

PROFITS

AND PROGRESS

THE constant upward movement in prices which has con-fronted the peoples of many countries since the end of

the war is without precedent in modern economic history.While, no doubt, the great bulk of the Australian communityare fully conscious of the impact of this new phenomenonon their daily lives—indeed often to their personal discomfort—from time to time this new background to the current eco-nomic scene flares up into special prominence and attractsspecial interest in the daily press and elsewhere. A multitudeof causes, many of them conflicting and contradictory, havebeen advanced in an attempt to explain rising prices. Thecauses advanced vary from the one extreme of assigning thewhole reason for rising prices to what is said by the socialistto be an inherent selfishness in the private enterprise systemitself, to the other extreme of attributing the blame solely tothe indolence and utterly irresponsible attitude of the workerat' the bench.

Of course, neither of these extreme views, taken in isola-tion, affords any real explanation of rising prices. The falsityof the claim that the drift in the value of the Australianpound rests solely on the shoulders of private business as aresult of the allegation that selling prices contain an undulyhigh profit element was exposed in an article entitled "HighPrices and Company Profits" in the last issue of Review. Thatarticle also showed clearly that indirect taxation such as SalesTax, Customs and Excise Duties, etc. exerts a much greaterinfluence on prices than do company profits. Further care-ful examination of the available data and statistics of companyprofits and of the relationship of dividends to incomes, revealsthat any limitation of company profits to, for example, 5%on shareholders' funds, or even their complete abolition couldnot improve the worker's lot one iota; nor could it, except inisolated cases, materially reduce the incomes of the wealthiersections of the community.

Page 43 1,6Pleif

PROFITS AND PROGRESS (continued)

THE INVESTOR'S ROLE IN FOSTERING ECONOMIC PROGRESS

From profits, and from profits alone, must come anyreward which an individual may hope to obtain in return forplacing his savings at the disposal of someone else to use inenlarging the real wealth, or the services, available to thecommunity. Those who continually decry the investor asa social parasite should take stock of the economic history ofAustralia. At the turn of the century much of our industryand commerce was conducted on relatively small scale lines.But, with the industrial growth and development of this cen-tury, increasing numbers of people have contributed theirsavings toward the cost of establishing new industries or ex-tending the old, until today, there are between seven hundredand eight hundred public companies with share capitalamounting to nearly £500 million listed on the MelbourneStock Exchange alone.

These millions are invested in factories, public utilities,mines, warehouses, store and retail establishments which pro-vide employment for hundreds of thousands of people andproducing a steady flow to the general public of the every-day necessities of life, the regular supply of which is nowtaken for granted by everyone.

These great strides in production and distribution, whichdoubled the standard of living of the ordinary Australiancitizen within the short space of half a century, would nothave been possible without the investment of an enormousamount of subscribed share capital. The scale of the newtechniques required by 20th century industry and commercenecessitated a volume of finance quite beyond the resourcesof any one person. In order to secure the funds for expan-sion, the founders of many enterprises were obliged to adoptthe limited liability form of company organisation. In con-sequence, profits and risks were spread over fresh thousandsof individuals engaged in all walks of life, and in varied de-grees of financial circumstances.

Under this system, no matter how limited his financesa man can establish an enterprise to meet what he feels is aneed of the community. Such a venture may, or may not,

Page 44

become profitable but at least this system provides the meanswhereby the initiative and genius of individual men and wo-men is turned to practical use for the benefit of the com-munity as a whole. It has resulted in a great diversification ofeconomic activity and in the satisfaction of the numerouseveryday wants and whims of the community which wouldnot be possible if investors were not prepared to risk theirsavings. And, if the austere socialist planner' objects to thesatisfaction of the whims of the community as distinct fromwhat he conceives ought to be its real wants, let him rememberthat any bunch of people—like any individual—will have itswhims satisfied somehow.

Also, it is to be remembered that, amidst the great storyof progress of Australian industry and commerce during thiscentury, are many cases—most now forgotten—of ventureswhich failed to satisfy a need, and therefore failed to becomeprofitable. But the resultant losses fall upon individual mem-bers of the community instead of upon the people as a whole,as, of course, is inevitable in the socialist state with its socialisedstructure of industry and business.

PROFITS AND WELL BEING OF EMPLOYEES GO HAND IN HAND

Wages and profits have a common interest in the pros-perity of business. When profits are buoyant it will generallybe found that wages and conditions for employees are best.*Wide awake unions in the United States of America have notbeen slow to realise that "bad" companies are those whichmake insufficient profits to ensure future employment andprospects for their members. In their view "good" companiesare those which make surpluses that are adequate to earn theconfidence of both investors and employees. For, if an en-terprise fails to make adequate profits it is doomed to stagna-tion. It will have insufficient funds to put back into thebusiness—the most economical method of financing the ex-pansion and modernisation of its plant and in the long run themost beneficial to its employees—and it may fail to attract theattention of investors in supplying further capital from out-side. There is something here to be learned by trade unionthought nearer home. Much adult economic education is• See graph on Page 53 showing the trend of wages and profits since 1928.

Page 45

(PROFITS AND PROGRESS (continued)

urgently required to explain the true role of profits, and toplace the nature of their size and distribution in its true pers-pective.

WHAT HAPPENS TO PROFITS ?

While most people are willing enough to concede theenormous economic progress that has been achieved under thepresent system of corporate financing through the issue andsale of shares, many allege that because too few own com-pany shares the system leads to a gross inequality in incomes.There could be no more erroneous conception.*

Apart from private and proprietary companies limitedby statute to 50 shareholders each, over all there are now abouthalf a million people who hold shares in public companies inAustralia. The average shareholding in our largest companiesis usually between 300 and 600 shares, providing an incomeof, say, from £25 to £50 per annum, which is in many casessubject to tax at varying rates. Life assurance companies areinvesting their funds to a considerable extent in the sharesof public companies. Every person who holds a life insurancepolicy, however small, has an indirect interest in the dividendspaid on these shares. The increasing tendency of many com-panies to issue 5/- shares also provides a valuable opportunityfor the small man to acquire a stake in Australian public com-panies—a tendency which, incidentally, would not have beenin evidence had shareholdings comprised, in the main, largeblocks of shares. When all the facts are taken into considera-tion, namely that by far the majority of the capital originatesfrom the savings of small investors; that we have a growingrecognition of profit sharing by various means, such as em-ployees' shares, it is evident that we are makin g considerablestrides towards a wide distribution of wealth.

There is a good deal of misunderstandin g about ' the ul-timate destination .of profits. The profits earned by com-panies are not distributed entirely to shareholders. Out ofprofits companies must pay heavy taxes (in aggregate nearly40% of their income) . They must also reinvest a large• See Table in I.P.A. "Review," May/June, 1949, Page 90, showing that there

are more shareholders than employees in a number of the larger AustralianPublic companies.

:Page 46

proportion of the remainder of their profits in order to ob-tain up-to-date, efficient equipment, to provide for expansionand to guard against hard times.

But the story does not end here. It becomes even moreilluminating when dividends are traced to their ultimate end,i.e. to the individual shareholders who receive them.

WHAT HAPPENS TO DIVIDENDS?

The final destination of company dividends is a matterof considerable public interest. Unfortunately, there is sucha lag in assessing this particular form of income that thelatest year for which reasonably complete data is available is1942/3. In that year, companies distributed a total of £49m.in dividends as follows:—

£m. approx.Australian Residents 32

Companies 12

Overseas 5

49

From information published by the Taxation Commis-sioner and further details supplied by the CommonwealthStatistician it would appear that dividends to Australian re-sident shareholders in 1942-3, were distributed in the follow-ing manner:—

DISTRIBUTION OF DIVIDENDS.£m. £m.

1. Included in income tax statistics 19.8

2. Received by exempt civilians (low incomes) 2.8 22.6*

3. Received by non-taxable institutions 1.0

4. Exempt dividends (Div. 7, gold mining, etc.) 5.0

5. Received by exempt members of forces .2

6. Received by taxpayers omitted from statistics (in-complete assessment) and evasion 2.9 9.1

31.7

This table shows that about 2/3 of dividends were sub-ject to taxation in the hands of shareholders. No taxationwas assessed on the remaining 1/3, because it comprised in• See analysis by income groups in the next table on Page 48.

Page 4 7 ',011614

PROFITS AND PROGRESS (continued)

the main, dividends of gold mining companies and certainprivate companies (specifically exempted by the Income TaxAssessment Act), dividends paid to religious, scientific, charit-able and educational institutions and to persons earning lessthan £105 per annum.

The Income Tax Statistics also refute the claim that divi-dends are only earned by the rich. The following table showsthe distribution of dividends, before and after tax amongvarious income groups:-

DISTRIBUTION OF DIVIDENDS TO SHAREHOLDERS BY INCOMETAX GROUPS 1942/43.

(Individual Resident Shareholders Only)Income Group

all SourcesDividends Received

Before Tax % of Total

£m.

EstimatedTax on

Dividends

£m.

Shareholders' Dividends% of Total

After Tax After Tax

£m.Under £105 2.80 12.40 - 2.80 20.93

105- 300 ... . 1.57 6.95 .12 1.45 10.84301- 500 1.75 7.75 .37 1.38 10.32501- 800 ... 2.31 10.23 .62 1.69 12.63801- 1,000 1.23 5.45 .43 .80 5.98

1,001- 2,000 . 4.23 18.73 , 1.78 2.45 18.312,001- 5,000 4.69 20.77 2.79 1.90 14.205,001-10,000 .... ... 2.27 10.06 1.65 .62 4.63

10,001-20,000 1.00 4.43 .81 .19 1.4220,001-30,000 ... .26 1.15 .22 .04 .3030,001-50,000 .21 .93 .18 .03 .22Over 50,000 .26 1.15 .23 .03 .22

22.58 100.00 9.20 13.38 100.00

NOTE: (a) The figures for dividends received by persons earning less than£105 p.a. were supplied by the Commonwealth Statistician. The remaining divi-dends which were liable for taxation were derived from the 26th Report ofthe Taxation Commissioner. The taxation on dividends was estimated fromthe figures of property tax paid on the property income (including the propertyelement of composite income) of each group.

(b) This table excludes dividends received by overseas shareholders (£5m.),companies (f12m.) and dividends not assessed for taxation, other than low in-comes.

Because of the heavy property rates of taxation whichwere levied on dividends, especially during the year 1942/43,to which these statistics relate, very little income from sharesremained in the hands of people earning above £2,000 a year,after paying their taxes. Of the £13.38m. shown in the tableabove as being net dividends retained by shareholders, about20% belonged to people earning less than £2 per week, i.e.persons such as married women and retired people. Onlyabout 20% was received by persons earning above £2,000 a

Page 48

year. The remaining 60% of dividends are paid to ordinarymembers of the public, in all grades of society, whose earningslie between £105 and £2,000 per annum, the majority of whomare in the lower groups earning up to £800 p.a.

Quite contrary to popular belief, income from sharesowned by the higher incomes, say those earning over £5,000a year, is relatively small in size. This is quite clear from astudy of Table I on page 51.

In 1942/43 (the latest year for which it is possible toobtain complete information from the Taxation Commis-sioner) , there were 1,962,756 resident taxpayers. Collectivelythey earned a total taxable income of £733.8m., apportionedas follows:-

Em. %From Personal Exertion 666.1 90.8From Dividends 19.8 2.7From Other Property 47.9 6.5

Total 733.8 100.0

The share of these incomes received by people earningover £5,000 per annum was earned in the followingmanner:-

£m.Income from Personal Exertion . .... 13.0Income from Dividends 4.0Income from Other Property 2.9

Total 19.9

The average income from dividends (after deductingtaxation) of all persons earning over £5,000 per annum frompersonal exertion, dividends and other property combined in1942/43 was as follows:- .

Income GroupAll Sources

No. ofpeople InGroup.

Av. GrossDividends

before Tax.

Amounts takenby theState inTax.

Average netDividends tothe Share-holder after

Tax.

£ £ £ £5- 6,000 735 1,023 716 3076- 8,000 719 1;378 1,003 3758-10,000 293 1,796 1,376 420

10-12,000 142 2,435 1,942 49312-15,000 124 3,019 2,424 59515-20,000 77 3,673 3,017 65620-30,000 48 5,404 4,527 87730-50,000 .. 24 8,592 7,425 1,167Over 50,000 .. 8 32,502 28,641 3,861

Page 49 rartarif,'‘

PROFITS AND PROGRESS (continued)

We may safely conclude, therefore, that abolition of com-pany profits and their distribution elsewhere would not (savein a relatively small number of instances) materially increaseor decrease anyone's income. (That is true if in all otherrespects the status quo were maintained. But what is un-doubtedly true, is that the mere hint of such a move wouldcause an unprecedented fall in the living standards of allclasses). Most shareholders depend on salaried employmentfor their livelihood. If dividends af ter tax earned by the top

income groups were distributed amongst the low incomes,

the latter would not benefit by more than a few pence per

week.

NOTE:

It is to be regretted that the latest year for which reasonably com-plete details are available, showing the distribution of dividends amongincome groups, should be as long ago as 1942/43. Unfortunately com-plete figures on this subject have not been published since the 26thReport of the Commissioner of Taxation released in May, 1947.

The latest annual report of the Commissioner (29th) was tabled inthe House of Representatives in March, 1951. This report covers theincome year 1946-47, but it does not contain statistics of dividends re-ceived by individual taxpayers. The Commissioner advises that it wasnot expected that such dividend figures would be extracted for quite sometime.

Aggregate dividends are higher today than in 1942/43. However,the reduction in property rates of taxation since 1942-43, particularlyon the high incomes, has been proportionately less than on the lowerincomes. It is considered, therefore, that whilst average dividends aftertax may be higher today than in 1942-43, the pattern of dividend dis-tribution among income groups today, would be very much the same.

Page 50

TABLE I.

AVERAGE INCOMES BEFORE AND AFTER TAXATION OF PERSONSEARNING OVER £5,000 PER ANNUM.

BEFORE TAX.

Annual Incomeall Sources

'E

PersonalExertion

£Dividends

£

OtherProperty

£5- 6,000 4,143 1,023 833

6- 8,000 5,105 1,378 1,119

8-10,000 6,385 1,796 1,489

10-12,000 7,483 2,435 1,827

12-15,000 9,635 3,019 1,987

15-20,000 11,973 3,673 2,025

20-30,000 16,169 5,404 3,404

30-50,000 24,655 8,592 2,735

Over 50,000 34,233 32,502 17,091

AFTER TAX.

Annual Incomeall Sources

PersonalExertion Dividends

OtherProperty

£ E £ £5- 6,000 1,390 307. 249

6- 8,000 1,480 375 304

8-10,000 1,603 420 347

10-12,000 1,762 493 372

12-15,000 1,896 595 381

15-20,000 2,362 656 361

20-30,000 2,587 877 552

30-50,000 3,494 1,167 372

Over 50,000 .... 4,099 3,861 2,035

SOURCE: 26th Report of the Taxation Commissioner.

NOTE: The figures after tax are estimates based on the total taxpaid by each group on each type of income.

Page 51

PROFITS AND PROGRESS (continued)

TABLE II.

ANALYSIS OF THE SHARE REGISTER OF A MEDIUM SIZEDAUSTRALIAN PUBLIC COMPANY.

HOLEPROOF LTD.

SIZE OF SHAREHOLDINGS.

No. Shares Held No. Shareholders %1- 100 1,445 49.5

101- 250 684 23.4251- 500 522 17.9501-1,000 ' 177 6.0Over 1,000 94 3.2

Total.... 2,922 100.0

Average No. of Shares Held approximately 285.

OCCUPATIONS OF SHAREHOLDERS.No.

Married Women 951 '32.6Professional Men .... . 369 12.6Industrial Employees .... 250 8.6Clerks, Salesmen, etc 246 8.4Business Executives . 192 6.5Retired PersonsEstates, companies and other

171 5.9

corporations .... . .... .... 147 5.0Agricultural Employees . 62 2.1Other Occupations .. . 534 18.3

2,922 100.0

NOTE: This analysis is based on shareholdings as at 31st December,1950. Since that date the £ ordinary shares of Holeproof Ltd. have beenconverted to five shilling units.

Page 52

- GRAPH ....

Trend of Wages and Profits, 1928-1950200

160

50..

0 •1928 1930 1932 1934 1938 1938 1940 1942 1944 1946 1948 f950

Sources:Wages: Commonwealth Statistician's figures of weekly award wages for adult males.Profits: Data published by the Commonwealth Bank showing profits of industrial andtrading companies as a percentage of shareholders' funds, after provision for taxation.Base: Both indices are based on the pre-depression year (1928)=-100.

NOTES ON THE GRAPH.The figures for wages are before taxation, but this would make little or no

difference to the trend of wages disclosed in the graph. In pre-war days the averagefamily wage-earner on award rates paid taxation amounting to about 1 or 2% ofhis weekly earnings, compared with a peak of about 6% during the war and currentrates of about 2%. It should also be noted that the graph covers award wagesonly. If bonuses and overtime etc., were included the post-war trend of wageswould be even steeper. Nett profits fell during the war largely because of the heavyinroads made by taxation into company income. During the war and post-war periodscompanies paid taxes amounting to nearly 40% of their income compared with anaverage of only 20% before the war.

The graph shows very clearly that there is a positive correlation in the move-ments of wages and profits, with wages rising much more steeply than profits inthe current boom and falling less than profits in periods of depression. The sharpdecline in profits with the onset of the 1929/30 crisis as disclosed in the graphdirectly refutes the frequently repeated claim that depressions benefit business. Ina slump wages tend to fall, but profits may fall away precipitously and shares may beworth only a fraction of their face value. Both employer and employee benefit verygreatly from prosperous conditions and it is in their joint interests to guard againstthe possibility a any serious downturn in economic activity.

Page 53

Film . . . .

PRODUCTIVITY:KEY TO PLENTY

In the November/December, 1950 issue of Review, wedrew attention to "Productivity: Key to Plenty" an importanteducational 16 mm. sound film which contains a vital messageapplying especially at the present time, when increased pro-duction is so essential for the well-being of all sections of theAustralian people. The film was produced in U.S.A. by En-cyclopaedia Britannica Films Inc., in collaboration with TheTwentieth Century Fund.

So great has been the demand for this film that theInstitute has recently acquired a second copy. Readers ofReview may be interested to know that the film has been shownwidely and appreciated by people in all walks of life. Thefilm has been shown to Cabinet Ministers, company execu-tives, foremen, industrial employees, public servants, studentsand members of the general public. Inquiries for it have beenreceived from all States of the Commonwealth.

The Institute has arranged several special screenings inresponse to requests from interested people and we gratefullyacknowledge the assistance of the Vacuum Oil Co. Pty. Ltd.and Brown and Dureau Ltd., who made their theatrettesavailable on these occasions. In addition H. V. McKay MasseyHarris Pty. Ltd. Australian Paper Manufacturers Ltd., thevarious State Film Centres and other government organisa-tions have purchased copies for their own use.

IN VIEW OF THE GREAT NEED TO CREATE A WIDERUNDERSTANDING OF THE IMPORTANCE OF IN-CREASED PRODUCTIVITY THE I.P.A. WILL GLADLYLEND THIS FILM GRATIS TO ANY ORGANISATIONWHICH MAY DESIRE TO MAKE ARRANGEMENTSFOR SCREENING IT.

Page 54

The following organisations and people have borrowedthe film from the I.P.A. for screening, some of these on morethan one occasion:

VICTORIA:

Australian Association of AdvertisingAgencies.

E. T. Brown Ltd.Bruck Mills (Aust.) Ltd.Roy Burton & Co. Pty. Ltd. -Carlton & United Breweries Ltd.Chamber of Commerce, Wangaratta.Commonwealth Scientific and Indus-

trial Research Organisation.Department of Commerce and Agri-

culture.Division of Industrial Development.Felt and Textiles of Australia Ltd.Footscray Rotary Club.James Hardie & Co. Pty. Ltd.Holeproof Ltd.Horsham Progress Association.I.C.I. of Australia and New Zealand

Ltd.Jubilee Industrial Exhibition.Kraft Cheese Co. Pty. Ltd.Liberal Country Party, Darling/East

Malvern Branch.Liberal Country Party, South Camber-

well Branch.McLaren Industries Ltd.Melbourne Junior Chamber of Com-

merce.Mildura Rotary Club.Joshua Pitt & Co. Pty. Ltd.The Plastics Institute of Australia

(Victorian Section).Prestige Limited.James Seymour & Co. Pty. Ltd.Shell Co. of Aust. Ltd.Terang Rotary Club.University High School.Vacuum Oil Co. Pty. Ltd.Victorian Chamber of Manufactures.Victorian Employers' Federation.G. W. McKinley Wilson, Sharebroker.Wycliffe Congregational Church Men's

Club.A. F. Ware (Ramsay, Ware Publishing

Pty. Ltd.).

NEW SOUTH WALES.

Australian Institute of Management,Newcastle.

Australian Institute of Management,Sydney.

Australian Paper Manufacturers Ltd.Lewis Berger & Sons Pty. Ltd.Commonwealth Steel Co. Ltd., New-

castle.James Hardie & Co. Pty. Ltd.Institute of Sales and Business Man-

agement.David Jones Ltd.Master Plumbers Association of -

tralia.The Plastics Institute of Australia,

N.S.W. Section.Rotary Club, Bathurst.Rural Bank of N:S.W.Sydney Grammar School.

SOUTH AUSTRALIA.

Adelaide Junior Chamber of Com-merce.

Australian Glass Manufacturers Co.Pty. Ltd.

British Tube Mills (Aust.) Pty. Ltd.Economics Society of Aust. & N.Z.,

S.A. Branch.Foy & Gibson (Stores) Pty. Ltd.General Motors Hoidens Ltd.S.A. School of Mines.

OTHER PLACES.

Inquiries have also been received fromthe following:A.C.T. Employers' Association, Can-

berra.Hobart Junior Chamber of Commerce.The Liberal and Country League of

W.A.—Bunbury Branch.Queensland Chamber of Manufactures.Queensland .Institute of Public Af-

fairs.

OPPORTUNITY TO SEE FILM IN ADELAIDE.Owing to the limited time available, a number of organisations were

unable to see the.film on its previous visit to Adelaide. In respense torequests we are making a copy of the film available for screenings inAdelaide from 1-31 August, 1951. Anyone interested in arranging a screen.ing should make prompt arrangements to do so by contacting Mr. B.Elliot Thompson, 14 Grenfell Street, Adelaide. Telephone: C 5370.

Page 55

• We are very pleased to have the privilege ofpublishing an article on the problem child ofthe Australian economy—the black coal industry,—by such an authority as Mr. H. A. Cameron.Keith Addison Cameron graduated as a Bache-lor of Mining Engineering at Melbourne Uni-versity. After early experience in Australiaand Overseas, he served with leading metal min-ing corporations throughout Australia until theend of 1946, when he became Chairman of theJoint Coal Board, newly constituted by the Com-monwealth and New South Wales Governmentsto promote improvements in the black coal min-ing industry of New South Wales. His wide ex-perience in mine management and his associa-tion with the Joint Coal Board uniquely qualifyMr. Cameron to write on this contentious sub-ject.Mr. Cameron resigned from the Joint Coal Boardin May, 1950, in order to take up his presentpost as Managing Director of Mt. MorganLimited, Queensland.

THE PRO LEM F COALBy K. A. CAMERON

SINCE 1945 there has been an increas-ing public interest in coal—an interest

stimulated by the direct effects of coalshortages ; but superficial, because onlyin rare cases has the public set out tolearn the truth about the industry, andthe reasons for the public inconvenience.

It is significant that no such—evensuperficial—interest was evinced in thesimilar period from 1930 onwards, andyet it was then that the groundwork waslaid for the unsatisfactory results whichwere to be experienced after the War.

For the last five years, the public, withpious complacency, has blamed variouslythe colliery employees, the Government,and even acts of God—such as weather—for the recurring coal shortages ; but in

fact the public has been getting from thisindustry, neither more nor less servicethan it should expect, if it faces therealities honestly.

As a broad generalisation it may be saidthat public opinion eventually moulds anyindustry of national importance. It willin fact influence the trends of the coal in-dustry; but unfortunately the public asa body has had no opinion ; largely be-cause it has not informed itself. There havebeen some opportunities to do this, andeven warnings in the past of the effectsof public disinterest and consequent ig-norance, but they have been virtually dis-regarded. That the shortage of coal is asevere handicap to national developmenthas often been said, but seldom reallyunderstood.

Page 56

For this state of affairs the .daily presscannot escape a .major share of the blame,because, generally, it has failed in itsduty of informing the public properly onimportant matters. It has not seen thedifficulties as a national problem on whichthe weight of informed public opinionmust be brought to bear, but as a prolificsource of spectacular headlines. It hasconsistently blamed one group for thefailures of the industry, when even a pas-sing acquaintance with the laws of pro-bability and human 'behaviour would sug-gest that such an attitude was unlikelyto be correct ; and it has usually em-phasised the bad points and rarely givencredit for the good. The task of educat-ing the public has been left to the morethoughtful — more responsible — bodiesand publications which try dispassion-ately to analyse the problem as a firststep to pointing its solution.

There are certain fundamental factswhich cannot be repeated too frequently,because intelligent examination of themgoes a long way to giving some under-standing of a complex problem only toooften beyond the comprehension of thecasual observer.

The problem of the Australian industryvaries only in degree—and its incidence—from that of the industry in other demo-cratic countries—its character is muchthe same.

In the pre-1939-war years, the coal in-dustries of United Kingdom, Holland,U.S.A. and Australia, had all reached alow state. The progress since then, to-wards recovery, has been strikingly dif-ferent in those countries, so that now theUnited States and Holland lead in ef-ficiency and buoyancy with the U.K. next,and Australia lagging badly. In one im-portant feature the coal industry in theUnited States differs from its counter-parts in the other countries mentioned—it is subject to the most intense competi-tion from alternative sources of fuel andpower. In Australia (as in U.K. and Hol-

Page 57

land) black coal is in a position of virtualmonopoly. Hydro electric power in thiscountry has only a limited field to date,except in Tasmania, and while the de-velopment of the great brown coalmeasures in Victoria has provided veryimportant supplies of fuel and power, ithas barely kept pace with the expansionin demand, so that Victoria, like the otherStates, still depends on N.S.W. black coal.There are as yet no commercially de-veloped resources of natural gas orpetroleum in the country.

A monopoly industry may be benevolentand there are one or two in Australia, butgenerally the protection of the nationalinterest demands that it be broken, orcontrolled to the common good. The firsthas been impossible until now, but furtherdevelopment of the Victorian brown coalmeasures, and of hydro electric poten-tialities, will help to loosen the strangle-hold in a few years. The search fornatural oil continues, but no easing of thesituation from this source can yet be con-fidently assumed. In the circumstancessome measure of control is essential, atleast for .a time, and I believe it is sig-nificant that this course, in varying de-gree, was adopted by the countries otherthan U.S.A.—first in Holland, then inEngland, and about the same time in Aus-tralia.

The constitutional relationships of theCommonwealth and the States presenteda rather special problem in Australia, andmoreover there was a desire to stop shortof nationalisation of the industry. Sowas conceived the idea of the Joint CoalBoard, with scope and authority built onthe joint powers of State and Common-wealth. Its purpose was to assist—tech-nically and financially—the industry toimprove its production as rapidly as pos-sible. Incidental to this aim were pricecontrol and distribution of supplies. Al-though the Commonwealth Governmentat the time offered the same measure ofcomplementary legislation and financial

THE PRO li LEM OF COAL (continued)

assistance to all States, only one accepted,but that one (N.S.W.) was the predomin-ant unit in black coal production in Aus-tralia.

In the post-war period, shortages havebeen the common story, both in the ser-vices provided by public utilities, and ingeneral commodities. It would be foolishto attempt to minimise the effect on thegeneral industrial activity of the shortageof the basic commodity—coal. It wouldbe equally foolish not to recognise that inour condition of very great industrial ex-pansion, the "bottleneck" could veryeasily shift from Coal to Transport, andin fact, in certain power plants has al-ready moved to Generating Capacity.

The typical post-war condition of short-age reflects the lag in development andcapital equipment, coupled with an un-precedented increase in consumer de-mand. But it is accentuated by the re-latively high proportion of domestic pro-duction which has gone into capital goods.For example—the steel industry has beenunable to satisfy the demand for its pro-ducts, but that industry has itself drawnheavily on its own production, as well ason a wide range of others, in equippingitself for increased output in the steel-works, in the collieries, and in the iron oreand flux mines.Significant Historical Features.

Let us look at the story of the coal in-dustry in Australia over say, the lasttwenty years, and for this purpose confineour attention to the bituminous (black)coal industry of New South Wales.

Black Coal Production in N.S.W.(Mines Department Records).

(Thousands of tons.)1914-1919 inclusive (Av. Annual) 8,9551920-1927 inclusive (Av. Annual) 10,854

9,4087,5867,0636,4056,756

1933 .. .. .. 7,0881934 .. .. .. .. .. .. .. .. 7,8401935 .. .. .. .. .. .. .. .. 8,6621936 .. .. .. .. .. .. .. .. 9,1611937 .. .. .. .. .. .. .. .. 10,0101938 .. .. .. .. .. .. .. .. 9,5311939 .. .. .. .. .. .. .. 11,149

Employment rose from 16,000-18,000men in the period 1914-1919 to a peak ofover 24,000 men in the 1920-1927 period,then fell to a "low" of 12,700 men in 1935.In 1928, 1929 and 1930 while the numberemployed was tapering off slowly, theposition was worse than the figures sug-gest, because employment was only part-time. This was a feature of the "depres-sion" years.

The implications of the tremendousvariation in men employed clearly andunderstandably have left on the industryan effect which cannot quickly be coun-teracted. In the last five years employ-ment in New South Wales has averagedabout 18,000 men.

The production of coal reflected the de-mand over the years considered. In 1947the demand for New South Wales coal inAustralia was estimated by the Joint CoalBoard at 13,000,000 tons in 1948, risinggradually to 16,000,000 in 1952. It mustbe remembered that long term estimatesof demand are subject to considerableerror if supply, in the earlier years, fallsfar short of requirements because therate of expansion of consumption isthereby retarded.

About 1930 the industry was grosslyover-developed in relation to demand. Asa consequence mines worked only inter-mittently, coal prices were cut to bed-rock levels—or below—and as a result,development was restricted, and goodmining practice prejudiced by short termcommercial considerations.

Then commencing in 1939, and risingsteeply in 1945, came an upsurge in de-mand under very much altered industrialcircumstances, and with the mines neitherdeveloped nor equipped to meet it—par-

Page 58

icularly under the new conditions. Thenmediate result was inevitable ; but this,ke any other problem of inadequate pro-uction, will be solved, given the desire onhe part of colliery proprietors, and thebility on the part of management. Thevertaking of the lag will of necessityake a long time, and call for heavy capitalxpenditure, but these are normal com-mitments in developing increased produc-ion in a heavy industry.Inman, Financial and Technical Aspects.

The eagerness of colliery proprietors tonvest additional capital in the industryvas tempered by an understandable dis-Lppointment, that the attractive profits to)e derived from a commodity in shortiupply should be denied them, because ofhe imposition of price control, and asyell by a natural fear of an early return;o oversupply, with all its dire results.

Management has had to face two main)roblems—technical and industrial. Theirst is often overlooked, yet it is funda-mental. Despite what has been done in;he last five years, the mines are not yetgully equipped to produce sufficient coal;o meet the demand, even if the industrial)roblem were solved. Nor is the generalStandard of plant and machinery in linewith that of modern equipment designedto obtain the maximum output per unit ofLabour. There has been, and still is, atendency to excuse the absence of tech-nical progress by the industrial difficul-ties, but clearly the excuse will not do.There has been too, a tendency to main-tain that development and equipment wasadequate to support required productionif labour exerted the same effort it did,say, in 1930. Not only was the premisewrong, but the point of view is completelyunrealistic.

The industrial aspect of management'sproblem is conditioned by several things:

There has been an almost :violent andapparently unexpected change in theintensity of the human side of indus-trial problems—a change which is gen-

eral and world-wide, but which hasfound management in this country, infar too many cases, inadequatelyequipped mentally and by experience tocope with it.

In a period of full employment, noone is compelled by economic circum-stances to work at a job which he doesnot like. Therefore, at such a time,the relative attractiveness of differentindustries and individual units of theone industry is highlighted, and unlessthe particular industry is attractive, itis difficult to establish or maintain in ita reasonable standard of labour ef-ficiency.

The coal mine employee has a deeplyingrained fear of a condition of amplecoal supplies—first because large stocksare a potential industrial weapon, andsecondly, because, in his experience,over-production eventually meansunder-employment. That these are notinevitable consequences cannot be de-monstrated under existing conditions.Therefore, we are presented here' witha public—and industrial—relations jobof the first magnitude.

Contrary to often expressed lay opin-ion, and the lying propaganda of thosewho know better, underground work,under proper conditions, is not undulyarduous or unpleasant; but until re-cently, the conditions in some collieries,or certain sections of them, un-doubtedly were bad. Similarly withliving conditions—largely living condi-tions are what the individual makesthem, with this important qualification—certain basic community facilitiesmust be provided by the appropriateauthority. In regard to this latter,some coal mining communities werebadly off—local government and gov-ernment authorities were reluctant tospend money in areas regarded as un-stable. Thus water supply and electricpower supply were lacking in somelocalities, and, in many, roads were in

Page 59

THE P

LEM OF COAL (continued)

very poor condition, while in the pre-dominantly coal mining areas thestandard of many community amenitieswas well below that of most rural townsof similar size.

The Communist Party is at work inthe coal industry, as well as in otherbasic industries. It numbers within itsindustrial ranks, capable, shrewd menwho have been quick to employ the in-herent ills .of the industry to furthertheir political objectives. They appre-ciate the fact that the industry is stillunder-developed and badly equipped ;they use to the full the natural fear ofover-production and under-employ-ment ; they shrewdly pin-point badconditions, over-emphasise the hazard-ous nature of the work, and do every-thing to keep alive the traditional classhatreds of the industry ; and they arenever at a loss to make capital, indus-trially, out of management's gross mis-takes and erors of judgment—and inthe coal industry, perhaps more than inany other, top management, conditionedby its very difficult and bitter experi-ence, is prone to let its emotions colourits judgment on industrial matters.The human aspect poses a problem of

considerable magnitude, but surely notone incapable of solution. The lines ofaction towards solving it, are first of alldirected by psychological or human con-siderations, and include the correction ofthe technical backwardness of the in-dustry, because notably this will meanimprovement in working conditions in-cidental to increased productive capacity.Secondly, they call for the recognitionthat the industrial sabotage beingdirected by clever tacticians, can only bemet adequately by similarly well plannedtactics—not by a feudal attitude now out-moded in industrial relations. Most ofthe causes for dissatisfaction which pro-vide a fertile field for industrial dis-turbances will be removed when the tech-nical job is completed. The remainder is

more intangible, but of paramount importance if the skilled "agent-provocateur" is to be out-manouvered, an(finally discredited.

It is in this sphere that managemen.must meet its greatest challenge. Traditionally it has been mastering technicaproblems, but the modern human problem in industry is a new one for whistmanagement largely is unprepared. Particularly is that emphasised in the coaindustry, whose background has increase(the magnitude of the adverse influencesNevertheless, as management acquiresbetter understanding of the human prob.lem, and the forces which operate uncle]modern industrial conditions, and em-ploys the new tool of industrial relationsthe problem will be solved, even in theface of the activities of the saboteurs.

It may come as a surprise to some tclearn that in a number of collieries worlis regular, and man shift performance ishigh. Other well-equipped collieries hay(a poor record, and some observers are in-clined to argue therefore, that technicalmodernisation is not the answer. Clearly,with a number of problems of widevariety, there can be no simple panaceafor all the ills—the solution will bereached only by simultaneous improve-ment in a number of features.

The rehabilitation of inadequately de-veloped and equipped mines calls for theinstallation of the most modern equip-ment for boring, cutting and loading coal,for efficient haulage and hoisting, and forancillary activities such as workshops,changehouses, man transport, etc. Inmany cases it calls, too, for non-produc-tive development work which makesheavy demands on labour and equipment.All these involve the expenditure ofmuch capital, and require considerabletime for their completion, particularly incircumstances of extreme world shortagesuch as existed in "the immediate post-waryears.

Page 60

As to capital cost, if Free Enterprises not prepared to take the risk, Govern-nents have expressed themselves as wil-ing to assist through the Joint Coal3oard.

The time factor for development isnarkedly reduced when the deposit isalienable to the open cut method of min-ng, and in the last eight or ten years,!xploration has located several areaswhere open cut methods can be applied.production by this method has increased!rom 45,000 tons in 1940 to 1,602,000 tonsn 1950.

The development of highly efficient ex-cavating and rock moving equipment is;radually extending the scope of thismining method, by increasing the depthto which the coal seam may be so ex-tracted. However, overall planning isnecessary to ensure that open cut miningloes not prejudice subsequent under-ground mining at greater depth.

It is perhaps significant that with oneor two notable exceptions, the colliery pro-prietors in New South Wales did not takeadvantage of the availability of modernequipment to introduce this new (to NewSouth Wales) method of attack, and itwas left to the Commonwealth Coal Com-missioner, and afterwards to the JointCoal Board, directly to engage in miningoperations so as to obtain relativelyquickly, an important contribution to theadditional coal production so urgentlyneeded. It seems ironic now, after thepracticability and economies, in suitablecircumstances, have been demonstratedbeyond question, that certain people have,almost overnight, acquired a tremendousenthusiasm for this method of mining,while some are s Iverely critical of theJoint Coal Board for having entered thefield of free enterprise. "Open-cut" coal hasbecome a catch-cry, as though a new typeof coal were discovered—in fact, becauseof the development of highly efficientmachines, we have a new method with ap-plication only to certain sections of certain

seams, and under certain conditions. Theselection of the best mining method forany mineral deposit is a technical con-sideration of many factors—not just amatter of personal preference.Types of Coal and the Vexed Question of

Quality.It seems desirable to say something

about the classes of coal, since obviouslythere is a great deal of misconception onthis point:

In New South Wales there are threemain types which may be classified ac-cording to their particular use, i.e., GAS,COKING, STEAM. All three may beutilised for heating and steam raising.Gas coal is characterised by high contentof volatile hydro-carbons, and yields ahigh make of industrial and domestic gas.Coking coal has physical and chemicalproperties which result in productionof a physically strong metallurgicalcoke. The coke produced in the retortingof gas coal is known as gas coke and isused for a variety of heating purposes,but has not the essential physical pro-perties of metallurgical coke.

Typically the South Maitland field pro-duces gas coal ; the Newcastle and South-ern fields, predominantly coking coal; andthe Western field, steaming coal. All canbe used for steam raising in plants ap-propriately designed for the particularproperties of each coal.

It is of the greatest importance nation-ally that, so far as practicable, the use ofeach different coal type is restricted tothe purpose for which it is speciallysuited. This does not automaticallyapply, and in fact considerable tonnagesof gas coal and coking coal have been,and still are, being used for steam raising.

Some consumers object to a change oftype of coal, and are reluctant to acceptthe fact that the use of coal must berationalised in regard to type. Someplants, too, have been critically designed,and conversion takes time and money.Moreover, while shortage exists in total,

Page 61

THE PRO LEM OF COAL (continued)

it is impossible to achieve the ideallybalanced consumption in types. However,the overall planning for increased produc-tion is concerned not only with total pro-duction, but with the necessary produc-tion of each type of coal. Broadly—if theconsumption of gas coal and coking coalwere restricted to those special purposes,the necessary additional total coal re-quirements should come from increasedproduction of steaming coal.

Quality is a term frequently usedloosely. It can be measured only in rela-tion to the particular purpose and plantunder consideration, e.g., many first classsteaming coals are useless as coking coals,while one coal excellent for use in onesteam boiler plant may be useless foranother. A high grade gas-making coalmay be completely unsuitable for a par-ticular boiler plant, e.g., about 90% ofthe production of best Maitland coal fromthe Greta measures cannot be used at theBunnerong power plant of the SydneyCounty Council, because the ash fusiontemperature is below the furnace operat-ing temperature of the boiler plant.

One factor common in all questions ofquality is ash content, i.e., the proportionof incombustible material. Coal seamscontain carbonaceous and non-carbon-aceous material as an extremely intimatemixture—the incombustible material hereis known as inherent ash. Most seams,in addition, show bands of "stone" tovarying degrees, and also stone from roofor floor may contaminate the coal asmined. This is known as extraneous ash.

Although the absence of competition inthe market tends to destroy the incentiveto market coal as clean as possible, theaim of the producer usually is to minimisethe amount of extraneous ash. However,several factors operate in the reversedirection:—

In machine mining, included bandsmust be taken with the coal, and attimes roof and/or floor material is un-avoidably extracted with the coal—in

hand mining, where formerly the cutorn was to sort out the stone undeground, it is increasingly difficult to i:sist on effective separation. Screenirand hand picking of the run-of-milproduct is conducted at the surfacemany mines, but this is at best onpartially effective, and under mode/labour conditions, hardly effectiveall.

The cleaner seams naturally exploitEfirst are becoming depleted, and searof higher ash content must be utiliseThis fact is often overlooked by tlconsumer, who cannot grasp all the inplications of the wasting asset natuiof mining.This general tendency towards highE

ash content is common to the coal itdustry in other parts of the world, anoverseas is being dealt with in one of twways, depending on the technical r(quirements of the consumer and the r(lative economics of the alternativeWhere the consumer demands, and is pr(pared to pay a premium for a coal of r(latively low ash content, it may be prcduced by the use of mechanical cleanin,devices frequently known as washerieWhere new coal consuming plant is bein,planned, it is designed to use coals ohigher ash content, which can be produceat cheaper cost.

In Australia the producing industr;has been slow to accept the need fomechanical cleaning plants ; firstly, because of the absence of competition, amsecondly, because the consumer generall'is not yet prepared to face up to tillhigher cost of cleaned coal. A noteworthy exception is the steel industrywhich, producing the bulk of the coal iuses, operates a washery at each of it,two steel-making plants.

Production Statistics.Some interesting deductions are pos

sible from a study of available statistic(of the industry.

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The average output per man shift—men employed directly in coal winningat the face in underground mines, i.e.,breaking and loading the coal) is about10.25 tons. There has been an import-ant improvement in this figure since1947 when the average output .wasabout 9.5 tons per man shift.

So far as is ascertainable, the figuresfor the pre-war and "depression"periods were about the same as thelatter figure, and in the interim theavailable hours of work have been re-duced by statutory changes, as well asby increased time of travelling to work-ing places as mines become deeper andmore extensive. The comparison there-fore, is not unfavourable to the post-war period and improvement in the lastthree or four years is most encouraging.

On the other hand the average out-put per man shift for all men employedin underground mines has remainedpractically steady at between 2.9 and3.1 tons for the post-war years, and islower than for the depression period.Unit production in open cut mines beingsubstantially higher than for under-ground mines, and applying only in themore recent period, has been eliminatedfrom the comparison.These comparisons reflect the increas-

ing depths and distances involved in thehandling of coal, materials and men asmines become older and more extensive.In the absence of improved handlingequipment and technique, the increase inthe proportion of indirect or "offhand"labour would appear inevitable to anyoneacquainted with production problems.

The output per man shift will continueto improve as facework equipment of themost modern type is installed, and the de-tail organisation of the multiple opera-tions forming the whole is brought to thehighest possible pitch. This, after all,is just "methods" engineering.

Coal haulage must be of the type andcapacity to handle the very high output

rates of modern face equipment. Mantransport must be the most rapid possibleso that the available working time in theface is a maximum. Too often, good faceequipment gives disappointing results be-cause of a "bottleneck" further along theproduction line, while in many New SouthWales collieries, the working faces aretwo to four miles from the mine entrance,at which point the working shift com-mences and finishes. Good engineeringapplied to these two features will resultin an increased output per man for allmen employed.

Summarising the position arrived at to-day, there . is in one respect cause for satis-faction, and in the other, while resultshave been generally disappointing, thereis no reason for pessimism.

On the technical side there is improvedman shift facework performance in theunderground mines. Also in undergroundmines the overall man shift performancehas ceased to decline, and there is someevidence of improvement which will be-come more marked as plans for modern-ised haulage, etc., and man transportcome to fruition. Production by open-cutmethods has raised the overall unit out-put of all men in the industry.

The result of these three factors is thatthe "capacity" of the industry has in-creased from about 265,000 tons per weekin 1947 to 305,000 tons per week in 1950.("Capacity" here, is the production thatwould be achieved if all mines workedevery day.) The increase in capacity isa measure of the technical improvementwhich has occurred in the period.

The actual annual production since 1947Tons

1947 .. 11,683,0001948 .. 11,721,0001949 .. 10,736,0001950 .. 12,798,000*

•Record production.

In comparing actual annual productionsit must be remembered that for severalyears up to and including 1948, "back"

has been:--

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THE P 0 LEM OF COAL (continued)

Saturdays were worked in the last threeor four months of the year. Since 1948they have not been worked. Also about1948, industrial awards increased annualholidays and sick leave with pay, reducingthe available working days in the year.

The difference between "capacity" andactual production clearly is accounted forby losses of which the greatest are thosecaused by strikes. It is in respect of thisfeature that the figures show little im-provement. On the other hand individualabsenteeism is relatively low. Consider-ing losses of man shifts from all causes,an analysis of twelve months fromAugust, 1949, to August, 1950, gives thefollowing round figures. The period wasselected to exclude major strikes such asthe Kemeira dispute of 1948 and thegeneral strike of 1949.

Loss of available man shifts due to:Industrial stoppages .. . . 5.0%Mechanical breakdowns, weather,

.. 0.5%Compensatable accidents . .. 2.5%Sick leave .. • • 4.0%Voluntary absenteeism .. 3.0%

Total loss of available man shifts 15.0%

For comparison, the total loss of avail-able man shifts from all causes (includ-ing major strikes) was:—

All IndustrialCauses Disputes

1948Underground

20.09 9.93Open Cut .. 9.19 4.151949Underground

25.49 16.45Open Cut

18.36 14.57

Conclusion.There still remains room for improve-

ment in the proportion of available work-ing time, and this will come as managementsees the problem in its right perspective,and learns to apply to it the modern twintechniques of industrial and public re-lations. These must be directed to con-vince both employer and employee thattheir interests are identical, and to de-monstrate beyond any doubt that thiscommon interest is not advanced by whatis called communism. To a great extentthis has been done in U.K. and U.S.A.—therefore it can be done in this country,and, if management is to retain its initia-tive, it must be done.

The technical side of the problem is ina fair way to being solved. Results onthe industrial side are still unsatisfactory,but they will be improved as the influenceof informed public opinion swings intoline with the efforts of enlightened man-agement.

Contributed articles by noted authorities in Australia and

overseas dealing with matters of public interest are published

from time to time in the I.P.A. Review. This Institute is not

necessarily in full agreement with the views expressed in these

articles. They are published in order to stimulate free dis-

cussion and inquiry.

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