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Productivity led wage disparity in the Indian industry.

Wage Productivity Linkages

Wages are closely linked to labour productivity. Rise in productivity acts as the deciding factor for the expansion of capacity and the adoption of improved technology. The implementation of advanced technology necessitates recruitment of skilled workers and impart of training to the existing workers. However, experienced and skilled workers are available at relatively higher wages in competitive labour markets. The studies by Dickens and Katz (1986), Krueger and Summers (1986), Holzer, et. al. (1988), Katz and Summers (1988), Katz and Murphy (1991), Krueger (1991), Krugman (1994), Lowe (1995), Murphy, et. al. (1998), Krueger (1999), Jean and Nicolettiacts (2002) and Viren (2005) have been widely referred by the researchers while examining the wage structure in industries. This study empirically examines the impact of productivity as well as technology on the determination of wages in different sub-sectors of the Indian industry.

Data Source & Sectoral Classification

Data for the study were sourced from the Annual Surveys of Industries (ASI). ASI statistics classify the factories into six sub-sectors, viz. (1) Un-incorporated enterprises, (2) Corporate Sector (3) Co-operative Societies, (4) Khadi and Village Industries, (5) Handloom Industries and (6) Others (including N.R.) activities. The Un-incorporated Sector comprised three sub-sectors viz. (i) Individual Proprietorship units (ii) Joint Family (HUF) establishments and (iii) Partnership firms while the Corporate Sector comprised four sub-sectors viz. (i) Public Limited Companies, (ii) Private Limited Companies, (iii) Government Department Enterprises and (iv) Public Corporations. Since Khadi and Village industries, Handloom industries and Others (including N.R) activities constitute very small proportion of the total ASI sample population, the data pertaining to these three sub-sectors were clubbed together and analyzed under the label KVHO in this study.

The design of data collection for the ASI classifies the industries into two categories viz. (i) the census sector units and (ii) the sample sector units. Over a period of time the definition of the census sector has been revised several times in order to alter its coverage. For example, prior to 1987-88 the census sector covered all the units employing 50 or more workers operating with power and 100 or more workers operating without power. As per the 1987-88 definitions, the census sector covered all the units employing 100 or more workers irrespective of being operated with or without power. In 1998-99, the census sector was redefined to include all the units, which employed 200 or more workers and also those units, which contributed significantly to the gross output even if they employed less than 200 workers. In addition to the public sector undertakings (PSUs), the 199899 definition of the census sector also included all the factories located in the 12 industrially backward states and Union Territories (UTs) viz., Goa, Himachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Nagaland, Tripura, Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu and Pondicherry. In 2004-05 the definition of the census sector was again revised to cover all the factories employing 100 or more workers in the industrially progressive states and UTs and all the factories that were located in the five industrially backward states and UTs. It is important to note that the revision in the definition of the census sector in 2004-05 brought the public sector undertakings into the general scheme in order to cover only those units, which were employing 100 or more workers. Thus, registered factories, which remained outside the purview of ASI census sector, formed the population for ASI sample sector. For selection of sample units, some specific method has been applied to determine the sample size for individual states and UTs. It has been claimed that the revision of the definition of census sector, and identification of sample size for ASI, has been done meticulously in order to obtain the precise estimates up to state level (ASI 2002-03). The same is expected to hold true for the sectoral level estimates.

Since there is considerable diversity in the characteristics of different subsectors, the sectoral study is expected to provide a true picture of wage productivity relationship in the Indian industry.

Frequent revisions in the sample design coupled with year-to-year fluctuations in coverage of industries from different activities in different states and UTs have caused considerable constraints in the analysis of ASI statistics. In spite of the limitations, ASI is the only reliable source of time series data for Indian industry. Table 1 shows the sub-sectorwise coverage of industries in the ASI factory sector during some selected years. It is apparent from the table that the total number of factories as well as the representation of each sub-sector in the ASI sample population has been fluctuating. Table 1 also reveals that the representation of Individual Proprietorship and Private Limited Companies has increased while that of KVHO has declined over a period of time.

ASI data considered for the present study pertained to (i) number of factories covered in ASI, (ii) number of workers and employees, (iii) payment of wages, salaries, provident fund, bonus, etc. (iv) value of fixed capital and (v) net value added. ASI data are available at current prices. For comparative analysis the time series financial data available at current prices were converted into constant prices though the application of appropriate price indices. As different price indices were considered for different purposes, the appropriate price index used for specific purpose would be mentioned at the appropriate place. It may be noted that all the financial data were measured at 1993-94 prices. It is also important to mention that due to significant rise and fall in the number factories covered in ASI during different years, the time series data pertaining to various parameters fluctuated significantly. Therefore, the time series data were first transformed into the averages of factories in order to generate a reliable set of data for the analysis. Thus analysis of factory averages would provide realistic estimates for the study.

Wage Disparities

ASI data on employment and payment of wages and salaries was considered to examine wage disparities among the workers and non-workers categories of employees within and across the sub-sectors. The term 'worker' means permanent as well as contract workers. The term non-worker in this study would refer to group of personnel who were employed as managers, supervisors and office or field staff. All India consumer price index (CPI) for industrial workers was used to deflate wages and salaries data. CPI translated the year-to-year wages and salaries data at current prices in to constant prices.

Average monthly payments of wages and salaries, their growth rates and coefficients of variations within and across the sub-sectors were calculated to examine the wage disparities. Time series analysis revealed that Public Limited Companies were high paymasters prior to the announcement of economic reforms. Initial years of economic reforms from 1992-93 to 199798 may be considered as the phase of restructuring as the industry adopted various measures to insulate from increasing global competition. The wage structure also underwent considerable changes in different sub-sectors during this period. During the 1991-98 period wages were relatively high in Government Department Enterprises. Since 1998-99 Public Corporations have emerged as the high paymasters. Table 2a and Table 2b show the average monthly payments (exclusive of non-wage benefits like bonus, provident fund, etc.), to workers and non-workers during some selected years. It is important to mention that wherever convenient, either the term 'wage' or 'payment' would be used at different places of data analysis.

Table 2a and Table 2b reveal considerable inter-sectoral wage differentials in the Indian industry. In 1981-82 average wage was highest in Public Limited companies and lowest in Individual Proprietor units. Individual Proprietor units paid only 23 percent of the average wage received by workers in Public Limited Companies while non-workers including paid family members in Individual Proprietorship units received only 40 percent of the salaries paid by Public Limited Companies. Similarly in 2005-06, average wage was the highest in Public Corporations and lowest in Individual Proprietorship units. In 2005-06 Individual Proprietor units paid only a little over 16 percent of the average wage paid by Public Corporations while non-workers including paid family members in Individual Proprietorship units received only a little over 18 percent of the salaries paid by Public Corporations. Likewise calculations for other sub-sectors also revealed the widening of wage disparities over a period of time.

Table 3 shows the disparities in payment within each sub-sector during different years. In 2005-06 the salary to wage ratio was 3.9 in Private Limited Companies, which was followed by 3.4 in Public Limited Companies, 2.9 in KVHO establishments, 2.7 in Partnership firms, 2.5 in Joint Family HUF, 2.4 in Cooperative Societies, 2.2 in Government Department Enterprises and 1.9 in Public Corporations. On the whole average salary of non-workers was nearly four times more than the average wages of workers during 200506. It is apparent from Table3 that the wage disparities have widened in almost all the sub-sectors.

Coefficients of variation were calculated to examine the wages differentials across different sub-sectors. Table 4 shows that over the period of 25 years from 1981-82 to 2005-06, coefficient of variation in the wages of workers fluctuated in the range of 43 percent to 73 percent. Similarly coefficient of variation in the salaries of non-workers ranged from 32 percent to 58 percent. High values of the coefficient of variation are an indicator of substantial wage and salary differentials across the sub-sectors.

To understand whether the disparities have widened or declined over the period, growth rates analysis is the appropriate measure. An inference from Table 3 is that the growth rates for different phases would show substantial disparities. It is also expected that the growth in the salaries of non-workers would be relatively higher than the growth in wages of workers because changes in technology are biased towards skilled professionals. Studies by Dickens and Katz (1986), Krueger (1991), Krugman (1994), Murphy et. al. (1998) and Viren (2005) have established that implementation of skill biased technologies have widened the wage disparities among workers due to increase in demand for professional and technical skills.

To estimate the growth in real wages, data pertaining to wage payments were deflated by Consumer Price Index of industrial workers. Least-squares method was used to calculate the growth rates in real wages and salaries. To estimate the least-squares growth rate, a linear regression trend line was fitted to the logarithmic values of the variable in the relevant period. The regression equation to estimate the growth rate is given below:

Ln [W.sub.t] = a + r t

where

[W.sub.t] is the average wage rate during the relevant year,

t represents time or the relevant year,

a is the intercept or constant,

r is the growth rate, and

Ln is the natural log.

Table 5 shows that wages and salaries increased at different rates in different sub-sectors during different phases of time. Positive growth indicates rise of real wages and vice versa. During 1981-91 real wages of workers recorded the highest growth in Co-operative Societies. But during 1991-01 to 2001-06, growth in real wages was relatively high in Public Corporations. On the other hand, real wages had fallen in KVHO units during 1981-91, 1991-01 and 2001-06. Public Limited Companies recorded a decline in real wages during 1991-01and 2001-06. Real wages had declined during 2001-06 in Co-operative Societies and Individual Proprietorship units. Similarly in the case of non-workers, relatively high growth in salaries was recorded in Co-operative Societies during the 1981-91period, Government Department Enterprises during 1991-01 and Private Limited Companies during the 2001-06 periods. On the other hand real wages of non-workers had declined in Individual Proprietorship units during 1981-91and in KVHO establishments during 2001-06.

With the implementation of economic reforms, Government of India enacted some changes in labour laws to facilitate the industry reduce surplus labour through the 'voluntary retirement scheme'. This helped the industry to restructure and insulate from global competitors. However, the process of restructuring emphasized on professional management and labour efficiency. As a result demand for skilled workers and professional managers increased which led to the widening of wage disparities within and across the sub-sectors. Relative variations in the growth of wages vis-a-vis salaries measure the shift in the wage disparities. Lower growth of wages compared to the growth of salaries is an indicator of the increase in wage disparities and vice-versa. The wage disparities, estimated for different periods of time in different sub-sectors are presented in Table 6. During 1981-91, wage disparities had declined in Individual Proprietorship units, Partnership firms, Private Limited Companies and Public Limited Companies. During 1991-01, only two sub-sectors viz., Joint Family HUF and Public Corporations recoded some fall in wage disparities, while in the remaining sub-sectors, wage disparities had widened. During 2001-06 wage disparities had widened in every sub-sector. For the overall industry, wage disparities, after a fall of 0.76 percent per annum during 1981-91, increased at 3.13 percent per annum during 1991-01 and 7.33 percent per annum during 2001-06.

Share of Wages in Productivity

With the assumption that the employer has the ability to make optimal use of labour and capital, an attempt is made in this section to examine the linkage between payment of wages and labour productivity. In the context of wage payments, it is important to mention that the fringe benefits received by workers in the factory sector vary from one unit to another due to variations in payment policies influenced by the labour productivity. Therefore, while analyzing the wage and productivity relationship, it is important to take into account fringe benefits also. As per the definitions used for data collection in ASI, the term 'emoluments' comprises wages and salaries together with fringe benefits and other non-cash payments like provident fund, etc. Data on the nominal emoluments and nominal net value added were converted to real values with the Wholesale Price Index of Manufactured Products. The wages and productivity relationship explains the distribution of income between labour and capital. For example, if wages rise at the same pace as productivity, the share of labour in net value added would remain unchanged. Net value added is the surplus of earnings, which is available for distribution between the factors of production i.e. labour and capital. The following equations establish the linkage between wages and labour productivity:

Average Wage = Total Emoluments / Total Number of Employees ... (1)

Labour Productivity = Net Value Added / Total Number of Employees ... (2)

Since the denominator in both the equations is the same i.e. total number of employees, the division of equation (1) by equation (2) would generate the share of wages in labour productivity. That is

Share of wages = Total Emoluments / Net Value Added

= Average Wage / Labour Productivity ... (3)

Equation (3) implies that

A Share of Wage = A Average Wage A Labour Productivity ... (4)

Equation (4) shows that a change in the share of wages is measured by the difference in the rate of growth of wages and labour productivity. For example, if average wage rises by 8 per cent and labour productivity increases by 5 per cent, then the share of wages will increase by 3 per cent. On the other hand if average wage rises by 5 per cent and labour productivity increases by 8 per cent, then the share of wages will decrease by 3 per cent. Thus, the share of wages will remain unchanged so long the rise in wages and growth in labour productivity remain unaffected. The above association clearly shows that rise in productivity provides some cushion for increase in wages without causing any deviation in the share of capital in productivity.

Growth in net value added is influenced by the internal as well as external factors. Therefore, during the year of low performance, net value added would decline causing an increase in the share of wages in productivity. This is also an indicator of the weakening of the financial strength of industry. If wages continue to increase faster than rise in labour productivity for unreasonable span of years, then the management would have to take necessary measures to enhance labour productivity in order to check the depletion of liquid capital or financial reserves. On the other hand, if rise in wages is relatively lower than the growth in labour productivity, then the employer's margins would swell. As per the general practice, some proportion of the increased margins would be transferred to reserve funds while the remaining surplus would be allocated for investments in production and marketing related activities.

Table 7 shows that during 1981-91 rise in real wages was relatively high in Cooperative Societies while labour productivity recorded relatively high growth in Individual Proprietorship units. As per equation-4 this means that share of wages in labour productivity was the highest in Cooperative Societies and the lowest in Individual Proprietorship units. In Cooperative Societies, a 9.3 percent per annum rise in real wages and 7.5 percent per annum growth in labour productivity led to about 1.8 percent per annum increase in share of wages in labour productivity during 1981-91. On the other hand, in the case of Individual Proprietorship units, the 4.3 percent per annum rise in real wages was lower than the 9.6 percent per annum increase in labour productivity due to which the share of wages in labour productivity declined by 5.3 percent per annum. Likewise, the share of wages in labour productivity declined by 2.6 percent per annum in Private Limited Companies, 2.2 percent per annum in Public Limited Companies, 1.4 percent per annum in Partnership firms, 0.4 percent per annum in KVHO establishments and 0.04 percent per annum in Public Corporations.

During 1991-01 annual growth in the share of wages in labour productivity was 2.3 percent in Individual Proprietorship units, 1.8 percent in Private Limited Companies, 0.6 percent in Joint Family HUF units and 0.02 percent in Partnership firms. On the other hand the share of wages in labour productivity declined by 4.9 percent per annum in Government Department Enterprise, 3.1 percent per annum in Cooperative Societies, 2.0 percent per annum in Public Corporations, nearly 2.0 percent per annum in KVHO establishments and 1.5 percent per annum in Public Limited Companies.

During 2001-06 share of wages in labour productivity increased in only two sub-sectors viz. KVHO and Individual Proprietorship units. In KVHO establishments share of wages had increased by 4.8 percent per annum while in Individual Proprietorship units the increase was 0.2 percent per annum. In the remaining sub-sectors share of wages recorded a decline; 35.3 percent per annum in Public Corporations, followed by 10.8 percent per annum in Public Limited Companies, 7.6 percent per annum in Private Limited Companies, 5.7 percent per annum in Cooperative Societies, 2.1 percent per annum in Partnership firms, 2.0 percent per annum in Government Department Enterprises and 1.8 percent per annum in Joint Family HUF units.

For the whole of industrial sector share of wages in labour productivity recorded a decline of 1.44 percent per annum during 1981-91, 1.37 percent per annum during 1991-01 and 10.55 percent per annum during 2001-06. A decline in the share of wages in labour productivity strengthens the confidence of investors in the working of industries because when industry moves on the trajectory of growth, labour productivity increases faster than the rise in wages. A decline in the share of wages also means an increased share of capital in value added which could be allocated for further investments in expansion of capacities, up-gradation of technologies, improvement of product qualities, strengthening of marketing activities and expansion of markets.

Wage Productivity Relationship

It is important to mention that in the estimation of wage productivity relationship, the use of two different deflators one for measuring real wages and the other for measuring productivity--would provide a misleading picture. This necessitates the use of only one deflator for Emoluments and Value Added. Therefore, the Wholesale Price Index (WPI) of Manufactured Products was used to convert the nominal 'Emoluments' and nominal 'Net Value Added' into real values before examining the wage productivity relationship. In the context of selecting a common deflator, it may be noted that any consistent deflator would show similar trends in the wages, productivity and their relationship.

In India, it is generally believed that the wage rates are not determined by the market conditions due to stringent labour laws and government policies biased towards the welfare of the workers. Statutory fixation of the minimum wages for unskilled workers, periodical revision of 'Dearness Allowance' linked to rise in the 'Cost of Living Index', and the revision of pay scales and other benefits of government employees based on the Pay Commission recommendations, also have considerable impact on wages in private and corporate sectors. The aforesaid situations do not support any linkage between the wages and productivity. Studies by Lowe (1995), Verlinden (1997), Carruth et. al. (1999) and Felipe (2005) have established that industrial wages are determined by the productivity of labour. In the previous section, the growth rate analysis also revealed some consistency in growth of wages and labour productivity. Since the growth rate analysis revealed substantial variations in wages as well as labour productivity across different sub-sectors during different time periods, it is important to examine their linear relationship through the regression analysis.

The ability to pay hypothesis states that labour productivity is an important determinant of wage rates. Assuming competitive market conditions, the theory of productivity states that average wage would be equal to the marginal product of labour. Cobb-Douglas production function equates the marginal product of labour to the average product of labour. Thus the linear relationship between wages and labour productivity can be examined through the following regression equation:

Ln [W.sub.i] = a + b Ln [P.sub.Li]

where

[W.sub.i] is average wage paid in sub-sector i,

[P.sub.Li] is labour productivity in sub-sector i,

a is constant or intercept of the regression line,

b is the elasticity of wage with respect to labour productivity,

Ln is the natural log.

Regression results for the wage productivity relationships are presented in Table 8. The F-test statistic was significant at 5 percent for every sub-sector, which strengthens the explanatory power of the regression equations for the respective sub-sectors. Value of [R.sup.2] was 0.38 for KVHO units, which means that only 38 percent of the variations of wages around its mean were explained by labour productivity. Another sub-sector for which the regression revealed weaker relationship between the wage and labour productivity is the Joint Family HUF establishments. For the remaining sub-sectors, values of [R.sub.2] varied in the range of 0.65 to 0.83. This indicates that labour productivity has significant influence on the determination of wage rates. [R.sup.2] was 0.79 for the aggregated industry in India. Statistical significance of regression equations and significantly high values of [R.sup.2] for most of the subsectors, states that labour productivity is an important determinant of wage rates in the Indian industry.

In the regression equation, b is the coefficient of labour productivity, which represents the elasticity of wages with respect to labour productivity. The value of coefficient b was positive and statistically significant in the regression equation of every sub-sector. This means that an increase in labour productivity leads to the rise in wages in every sub-sector of the Industry. However, the extent of rise in wages due to the increase in labour productivity would vary from one sub-sector to another depending on the value of the coefficient, b. The value of coefficient b ranged from 0.33 to 0.67. For the aggregated industry, the value of b was 0.39 which means that one percent increase in labour productivity would lead to about 0.39 percent increase in wage rates in the industrial sector in India. Thus the regression results support the hypothesis that labour productivity has strong influence on the determination of wages in the Indian industry.

Impact of Technology on Wages

Technology plays an important role in the rise of labour productivity. Dickens and Katz (1986), Krugman, (1994), Murphy et. al. (1998), and Jean and Nicoletti (2002) conducted exhaustive studies to examine the role of technology in the determination of wages. In the context of Indian industry, some important studies, which examined the relationship between technology and wage rates were by Papola (1972), Dholakia (1976), Verma and Subbayamma (1985), Bhatnagar (1988), Singh (1991), Sidhu (1997), and Bhandari and Heshmati (2006). To examine the importance of technology in the determination of wages, capital-labour ratio was used as the proxy for technology. Investment of capital for installation of advanced technology or up-gradation of existing machinery leads to rise in capital-labour ratio. Highly skilled workers and competent supervisors are required to operate modern and complex machineries. This necessitates the impart of training to the already employed workers and recruitment of skilled workers and supervisors. However, experienced and skilled labour is available at relatively higher wages in the competent labour markets. Therefore, capital intensity and wage rates are expected to have linear relationship. The impact of technology on wage in different sub-sectors of the industry was examined through the following regression equation:

Ln [W.sub.i] = a + b Ln [K.sub.i]/[L.sub.i]

where

[W.sub.i] is average wage paid in sub-sector i,

[K.sub.i]/[L.sub.i] is capital-labour ratio in sub-sector i,

a is constant or intercept of the regression line,

b is the elasticity of wage with respect to capital intensity, and

Ln is the natural log.

Table 9 shows that the values of F-test were significant at 5 percent for all the sub-sectors except KVHO. This indicates that the regression equation explains the linear relationship between wages and technology in all the sub-sectors except the units in KVHO sub-sector. Relatively high value of [R.sup.2] for Partnership firms (0.89) implies that technology was an important determinant of wage rates in this sector. On the other hand negligible value of [R.sup.2] (0.001) for KVHO sector indicates the absence of wages and technology linkage. For the whole of industry, value of [R.sup.2] was 0.74 which means that around 74 percent of the variations of wages around its mean were explained by the technology.

The value of coefficient b ranged from 3.55 to 10.35 for different sub-sectors other than KVHO. For KVHO sub-sector the value of coefficient b was very low (0.21) and statistically insignificant. It appears that technology has strong influence on the determination of wages in Public Limited Companies as well as Private Limited Companies. On the other hand the technology did not influence wage rates in KVHO units. In the remaining sub-sectors, influence of technology on the wage rates is either medium or low. For the aggregated industries value of coefficient b was 8.7 which means that an increase of one percent in capital-labour ratio would lead to about 9 percent rise in wage rates in the industrial sector in India.

An important observation from Tables 8 and 9 is that wage rates are influenced by both labour productivity as well as technology. But, it is difficult to say whether labour productivity or technology has more influence on the determination of wage rates. However, considering the sequence of relationships, it may be concluded that the adoption of improved technology enhances labour productivity, which leads to rise in wage rates.

Conclusion

Wage structure in Indian industry has undergone considerable changes over the years. The process of economic reforms and globalisation of the Indian economy have led to restructuring of the industrial sector in India. Presently the domestic industries in India are competing with the multinationals in the labour as well as product markets. The process of modernization coupled with the induction of skilled workers and professional managers in the system has led to rise in labour productivity as well as wage rates. Considerable variations in labour productivity have led to the widening of wage disparities within and across the sub-sectors over the period of time. The study concludes that wages in the industrial sector in India are determined by the labour productivity.

References

Bhandari, A.K. & A. Heshmati (2006), "Wage Inequality and Job Insecurity among Permanent and Contract Workers in India: Evidence from Organized Manufacturing Industries", Discussion Paper No. 2097, Institute for the Study of Labour (IZA), Bonn, Germany.

Bhatnagar, Veena (1988), "Wage Productivity Relationships in Indian Industries", Productivity, XXVIII ( 4).

Carruth, A., B. Collier & A. Dickerson (1999), "Inter-Industry Wage Differences and Individual Heterogeneity : How Competitive is Wage Setting in the UK?", ESRC Research Centre on Micro-Social Change at the University of Essex.

Dholakia, B.H. (1976), "Determinants of Inter-industry Wage Structure in India", The Indian Journal of Industrial Relations, 11(4).

Dickens, W.T. & L.F. Katz (1986), "Inter-industry Wage Differences and Industry Characteristics", National Bureau of Economic Research, Working Paper No. 2014, Cambridge.

Felipe, J. (2005), "A Note on Competitiveness, Unit Labour Costs and Growth: Is 'Kaldor's Paradox' a Figment of Interpretation"? CAMA Working Paper 6/2005, Centre for Applied Macroeconomic Analysis, The Australian National University.

Holzer, H.J., L.F. Katz, & A.B. Krueger (1988), "Job Queues and Wages: New Evidence on the Minimum Wage and Inter-Industry Wage Structure", Working Paper No. 230, Industrial Relations Section, Princeton University.

Jean, S. & G. Nicoletti (2002), "Product Market Regulation and Wage Premia in Europe and North America: An Empirical Investigation", Economics Department, Working Paper No. 318, Organisation for Economic Co-operation and Development.

Katz, L.F. & K.H. Murphy (1991), "Changes in Relative Wages, 1963-1987: Supply and Demand Factors", Working Paper No. 3927, National Bureau of Economic Research, Cambridge.

Katz, L.F.& L.H. Summers (1988), "Can Inter-Industry Wage Differentials Justify Strategic Trade Policy", Working Paper No. 2739, National Bureau of Economic Research, Cambridge.

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Krueger, A.B. & L.H. Summers (1986), "Reflections on the Inter-Industry Wage Structure", Working Paper No. 1968, National Bureau of Economic Research, Cambridge.

Krugman, P. (1994), "Past and Prospective Causes of High Unemployment", Federal Reserve Bank of Kansas City, Economic Review, Fourth Quarter.

Lowe, P. (1995), "Labour-Productivity Growth and Relative Wages: 1978-1994", Reserve Bank of Australia Conference, Productivity and Growth.

Murphy, K.M., W.C. Riddell & P.M. Romer (1998), "Wages, Skills and Technology in the United states and Canada", Working Paper No. 6638, National Bureau of Economic Research, Cambridge.

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Sidhu, Hina (1997), "Wage Differentials in SSI Sector in Gujarat", Indian Journal of Industrial Relations, 33 (2).

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Singh, L. (1991), "Changes in the Inter Industry Structure of Wages: The Case of Punjab", Indian Journal of Industrial Relations, 27 (2).

Verlinden, J. (1997), "Concept, Measurement and Policy Implications of the Nairu-Perspective from Belgium", Working Paper No.184, Organisation for Economic Co-Operation and Development, Paris.

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Hina Sidhu is Reader in the Dept. of Economics, School of Social Sciences, Gujarat University, Ahmedabad 380 009.

E- mail: hinasidhu@yahoo.co.in
Table 1: Sub-sector wise Coverage of Factories in the ASI (%)

Sl. No.   Sector                       1981-82    1985-86    1991-92

1         Individual Proprietorship      18.88      17.55      19.14
2         Joint Family HUF                0.00       0.00       6.68
3         Partnership                    47.20      53.95      40.16
4         Unincorporated Enterprises
          (1+2+3)                        66.08      71.50      65.97
5         Public Limited Company
          Corrected                       7.19       7.82      10.65
6         Private Limited Company         9.72      14.81      17.01
7         Govt. Dept. Enterprises         0.00       0.00       2.35
8         Public Corporation              1.77       2.10       1.69
9         Corporate Sector (5+6+7+8)     18.68      24.73      31.70
10        Co-operative Societies          1.90       1.95       1.99
11        KVHO *                         13.34       1.83       0.34
          ASI Total                     100.00     100.00     100.00
          ASI Total (Number)            105037     101016     112286

Sl. No.   Sector                       1995-96    2001-02    2005-06

1         Individual Proprietorship      20.15      24.75      27.75
2         Joint Family HUF                4.67       2.41       2.04
3         Partnership                    37.44      35.38      33.02
4         Unincorporated Enterprises
          (1+2+3)                        62.26      62.54      62.81
5         Public Limited Company
          Corrected                      10.66      10.77       9.01
6         Private Limited Company        18.82      23.52      25.64
7         Govt. Dept. Enterprises         2.31       0.33       0.13
8         Public Corporation              3.87       0.53       0.29
9         Corporate Sector (5+6+7+8)     35.66      35.15      35.08
10        Co-operative Societies          1.65       1.59       1.46
11        KVHO *                          0.43       0.72       0.65
          ASI Total                     100.00     100.00     100.00
          ASI Total (Number)            134571     128550     140161

* Khadi & Village, Handloom and Others (incl. NR)

Table 2 (a): Average Monthly Wage and Salary at Current Prices (Rs.)

Sector                          1981-82           1991-92
                            Worker    Non-    Worker    Non-
                                     Worker            Worker

Individual Proprietorship     197      638      728     1480
Joint Family HUF               NA       NA      845     1429
Partnership                   262      520      845     1503
Public Limited Company        851     1597     2476     4422
Private Limited Company       497     1032     1263     2550
Govt. Dept. Enterprises        NA       NA     2422     3594
Public Corporation            689     1109     2083     4782
Co-operative Societies        340      470     1838     2986
KVHO *                        798     1266     1587     2917
Coef. of Variation (%)         51       44       44       44
ASI Total                     600     1188     1806     3196

Sector                          2001-02           2005-06
                            Worker    Non-    Worker    Non-
                                     Worker            Worker

Individual Proprietorship    1897     2926     2138     4710
Joint Family HUF             1945     3431     2400     5918
Partnership                  2143     4110     2646     7013
Public Limited Company       5510    14090     6228    21270
Private Limited Company      3092     8582     3927    15195
Govt. Dept. Enterprises      5957    11113     8102    16902
Public Corporation          10126    17614    13150    25652
Co-operative Societies       4431     8080     4833    11663
KVHO *                       3372     9956     3050     8890
Coef. of Variation (%)         62       56       69       56
ASI Total                    4058    10251     4398    15331

* Khadi & Village, Handloom and Others (incl. NR)

Table 2 (b): Average Monthly Wage and Salary at 1993-94 Prices ( Rs.)

Sector                          1981-82           1991-92
                            Worker    Non-    Worker    Non-
                                     Worker            Worker

Individual Proprietorship     547     1775      858     1743
Joint Family HUF               NA       NA      995     1683
Partnership                   728     1447      995     1770
Public Limited Company       2367     4441     2917     5209
Private Limited Company      1382     2868     1488     3004
Govt. Dept. Enterprises        NA       NA     2854     4234
Public Corporation           1914     3082     2454     5634
Co-operative Societies        945     1306     2165     3518
KVHO *                       2220     3521     1870     3436
Coef. of Variation (%)         51       44       44       44
ASI Total                    1667     3303     2128     3765

Sector                          2001-02           2005-06
                            Worker    Non-    Worker    Non-
                                     Worker            Worker

Individual Proprietorship    1057     1631     1018     2242
Joint Family HUF             1084     1912     1142     2817
Partnership                  1194     2290     1259     3338
Public Limited Company       3070     7851     2964    10125
Private Limited Company      1723     4782     1869     7233
Govt. Dept. Enterprises      3319     6192     3857     8046
Public Corporation           5642     9815     6260    12211
Co-operative Societies       2469     4502     2301     5552
KVHO *                       1879     5548     1452     4232
Coef. of Variation (%)         62       56       69       56
ASI Total                    2261     5712     2094     7298

* Khadi & Village, Handloom and Others (incl. NR)

Table 3: Sub-sector wise Ratio of Average Salary to Average Wage

Year                        1981-82   1985-86   1991-92   1995-96

Individual Proprietorship    3.25      2.01      2.03      2.44
Joint Family HUF              NA        NA       1.69      2.08
Partnership                  1.99      1.82      1.78      2.11
Public Limited Company       1.88      1.82      1.79      1.85
Private Limited Company      2.08      2.01      2.02      2.20
Govt. Dept. Enterprises       NA        NA       1.48      1.49
Public Corporation           1.61      1.74      2.30      1.55
Co-operative Societies       1.38      1.73      1.63      1.59
KVHO *                       1.59      1.57      1.84      2.54
ASI Total                    1.98      1.98      1.77      1.94

Year                        2001-02   2005-06

Individual Proprietorship    1.54      2.20
Joint Family HUF             1.76      2.47
Partnership                  1.92      2.65
Public Limited Company       2.56      3.42
Private Limited Company      2.78      3.87
Govt. Dept. Enterprises      1.87      2.09
Public Corporation           1.74      1.95
Co-operative Societies       1.82      2.41
KVHO *                       2.95      2.92
ASI Total                    2.53      3.49

* Khadi & Village, Handloom and Others (incl. NR)

Table 4: Coefficient of Variation in Wages and
Salaries across the Sectors (%)

Year       Wage   Salary

1981-82     51      44
1982-83     49      39
1983-84     47      32
1984-85     47      48
1985-86     47      44
1986-87     49      43
1987-88     49      43
1988-89     43      36
1989-90     46      44
1990-91     48      45
1991-92     44      44
1992-93     47      37
1993-94     44      58
1994-95     50      44
1995-96     46      32
1996-97     55      41
1997-98     52      48
1998-99     51      44
1999-2K     56      51
2000-01     58      47
2001-02     62      56
2002-03     66      54
2003-04     73      57
2004-05     69      54
2005-06     69      56

Table 5: Intra-sector Growth of Wage Payments ( % per annum)

Sector                          1981-91          1991-01
                            Worker    Non-    Worker    Non-
                                     Worker            Worker

Individual Proprietorship    6.18    -7.69     1.81     3.44
Joint Family HUF              NA       NA      1.12     0.45
Partnership                  3.68     1.84     1.07     2.71
Public Limited Company       3.09     2.31    -0.26     2.62
Private Limited Company      2.34     1.21     0.24     3.14
Govt. Dept. Enterprises       NA       NA      2.93     6.74
Public Corporation           6.32     6.51     5.90     5.59
Co-operative Societies       7.97     8.54     0.17     1.85
KVHO *                      -0.38     1.26    -0.84     0.51
ASI Total                    3.69     2.94    -0.35     2.78

Sector                          2001-06           1981-06
                            Worker    Non-    Worker    Non-
                                     Worker            Worker

Individual Proprietorship   -0.39     6.62     2.42     0.06
Joint Family HUF             0.25     6.87      NA       NA
Partnership                  1.43     8.65     1.92     2.85
Public Limited Company      -0.89     6.15     0.47     2.81
Private Limited Company      2.26     9.29     0.24     2.67
Govt. Dept. Enterprises      2.46     7.52      NA       NA
Public Corporation           2.57     4.45     4.54     5.04
Co-operative Societies      -1.39     5.20     2.50     3.57
KVHO *                      -6.25    -4.75    -2.16     1.46
ASI Total                   -1.74     5.59     0.61     2.58

* Khadi & Village, Handloom and Others (incl. NR)

Table 6: Sub-sector wise Growth of Wage Disparities ( % per annum)

Sector                            Shift in Wage Disparity
                            1981-91   1991-01   2001-06   1981-06

Individual Proprietorship   -13.87     1.63      7.00     -2.36
Joint Family HUF              NA      -0.67      6.62       NA
Partnership                  -1.83     1.64      7.22      0.93
Public Limited Company       -0.78     2.88      7.04      2.35
Private Limited Company      -1.13     2.90      7.03      2.42
Govt. Dept. Enterprises       NA       3.80      5.06       NA
Public Corporation            0.19    -0.32      1.88      0.50
Co-operative Societies        0.57     1.68      6.60      1.07
KVHO *                        1.64     1.35      1.51      3.62
ASI Total                    -0.76     3.13      7.33      1.97

* Khadi & Village, Handloom and Others (incl. NR)

Table 7: Growth in the Share of Wages in Labour
Productivity (% per annum)

Sector                      1981-91   1991-01   2001-06

                   A. Growth of Wages

Individual Proprietorship    4.29      2.86      -2.56
Joint Family HUF              NA       1.47      -1.30
Partnership                  4.39      2.10      -0.02
Public Limited Company       4.24      1.59      -1.46
Private Limited Company      3.23      1.72       1.60
Govt. Dept. Enterprises       NA       4.52       0.65
Public Corporation           7.77      5.76      -0.08
Co-operative Societies       9.30      1.62      -2.60
KVHO *                       1.42     -0.81      -9.63
ASI Total                    4.83      1.29      -2.57

              B. Growth of Labour Productivity

Individual Proprietorship    9.62      0.56      -2.80
Joint Family HUF              NA       0.85       0.54
Partnership                  5.78      2.08       2.07
Public Limited Company       6.44      3.11       9.29
Private Limited Company      5.79     -0.07       9.22
Govt. Dept. Enterprises       NA       9.37       2.67
Public Corporation           7.81      7.76      35.18
Co-operative Societies       7.51      4.72       3.05
KVHO *                       1.79      1.18     -14.46
ASI Total                    6.27      2.66       7.97

C. Growth in the Share of Wages in Labour Productivity

Individual Proprietorship   -5.32      2.30       0.24
Joint Family HUF              NA       0.63      -1.84
Partnership                 -1.39      0.02      -2.10
Public Limited Company      -2.20     -1.51     -10.76
Private Limited Company     -2.55      1.79      -7.62
Govt. Dept. Enterprises       NA      -4.85      -2.02
Public Corporation          -0.04     -2.00     -35.27
Co-operative Societies       1.79     -3.10      -5.66
KVHO *                      -0.37     -1.99       4.83
ASI Total                   -1.44     -1.37     -10.55

* Khadi & Village, Handloom and Others (incl. NR)

Table 8: Regression Results for Wage-Productivity Relationship
(1981-06 )

Sector                      Constant   Coefficient b   t--Statistic

Individual Proprietorship   -1.5451          0.4297     6.5250 ***
Joint Family HUF #          -1.4892          0.3691     3.2620 ***
Partnership                 -1.2834          0.6679    10.5420 ***
Public Limited Company      -0.9014          0.3398     9.1750 ***
Private Limited Company     -1.1903          0.4628     7.3392 ***
Govt. Dept. Enterprises #   -0.7189          0.3635     6.3014 ***
Public Corporation          -0.8214          0.4908    10.4260 ***
Co-operative Societies      -0.8500          0.6722     7.2474 ***
KVHO @                      -1.0334          0.3544     3.7704 ***
ASI Total                   -1.0726          0.3887     9.2023 ***

Sector                      [R.sup.2]   d.f.       F

Individual Proprietorship       0.65     24    42.57
Joint Family HUF #              0.40     17    10.64
Partnership                     0.83     24    111.13
Public Limited Company          0.79     24    84.18
Private Limited Company         0.70     24    53.86
Govt. Dept. Enterprises #       0.71     17    39.71
Public Corporation              0.83     24    108.70
Co-operative Societies          0.70     24    52.52
KVHO @                          0.38     24    14.22
ASI Total                       0.79     24    84.68

# ASI data Available since 1988-89 *** significant at 1%
@ Khadi & Village, Handloom and Others (incl. NR)

Table 9 : Regression Results for Wage-Technology Relationship
(1981-06)

Sector                      Constant   Coefficient b   t--Statistic

Individual Proprietorship   12.2091          6.4123     7.9631 ***
Joint Family HUF #           9.4367          5.2769     2.3551 **
Partnership                 12.2641          6.8233    13.9076 ***
Public Limited Company       9.4365         10.3523     8.9986 ***
Private Limited Company     13.0927          9.2892     6.1443 ***
Govt. Dept. Enterprises #    6.1901          6.0033     4.6084 ***
Public Corporation           4.0266          3.5475    12.7551 ***
Co-operative Societies       5.1682          3.8942     7.5110 ***
KVHO @                       0.4245          0.2052     0.1789
ASI Total                   10.5829          8.7010     8.0580 ***

Sector                      [R.sup.2]   d.f.       F

Individual Proprietorship      0.734     24    63.41
Joint Family HUF #             0.257     17     5.55
Partnership                    0.894     24   193.42
Public Limited Company         0.779     24    80.98
Private Limited Company        0.621     24    37.75
Govt. Dept. Enterprises #      0.570     17    21.24
Public Corporation             0.876     24   162.69
Co-operative Societies         0.710     24    56.41
KVHO @                         0.001     24     0.03
ASI Total                      0.738     24    64.93

*** significant at 1% ** significant at 5%
# ASI data available since 1988-89
@ Khadi & Village, Handloom and Others (incl. NR)
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Author:Sidhu, Hina
Publication:Indian Journal of Industrial Relations
Geographic Code:9INDI
Date:Jan 1, 2010
Words:7176
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