CONFIDENTIAL
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rise in living standards being resumed. But at this point the oil crisis struck bringing a sharp further twist to the rise in prices of all imported goods, including food from China. It also brought new uncertainties to export prospects. In consequence real wages have failed to rise as they would other- wise have done.
In the twelve months to March this year the consumer price index increased by 23%, and the foodstuffs component by 29%, the latter included increases in the import price of rice and flour of 107% and 70% respectively. As against these
increases in the cost of living the index of industrial wages rose by 9% over the same period. The implications are obvious, the practical social affects certainly require very careful watching. As an annex to this despatch I attach a note on the social impact of this situation, prepared by a specialist group. It paints a picture of a population carrying on well in a situation which is not as easy as it has been accustomed to, but stops far short of real want, let alone crisis or social disorder. real danger lies in any significant increase in unemployment. Though there is some under-employment, there is still no sign of significant unemployment.
The
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The rectification of the discrepancy between wages and cost of living lies in a rise in wages, insofar as this is consistent with the viability of industry. There is no question of wages remaining static. The Government, for instance, will announce a pay increase, ranging from 22% at the bottom to 12% at the top end of the Master Pay Scale, at the end of June. The major utilities will follow suit. The award is in line with similar increases recently negotiated in 20 leading firms. This will give impetus to union and non-union pressure already being exerted for increases. Always assuming there is no
CONFIDENTIAL
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