INDIA BUSINESS WORLD - JUNE 2006
THE MONTH THAT WAS...

INDUSTRIAL WAGES RISE 7.5% ANNUALLY DURING 1998-99 to 2003-04

  THE demand for workers is rising. This is reflected in the sharp rise in their salaries. Depending on sectors, the average annual wage earnings of workers have grown by 15-35% last year. The New Economy software companies have witnessed more than 35% rise in their wage bill in 2005-06 over the previous year. The share of wages in total expenditure was estimated at 56%. The aggregate wage bill of computer hardware companies has grown by 36% during the same period.

Of course, wage bill in the New Economy was growing even when workers in other sectors were spending sleepless nights for fear of losing their jobs. Software companies have been the biggest recruiters in recent years. There is another rationale for higher wage bills of software companies as workers here are better qualified compared to their counterparts in other industries.

But the question is: Have the earnings of industrial workers in general increased over the past years? The answer apparently is affirmative. Understandably, the salary hike in the New Economy sector was much higher, but the industrial workers, skilled and unskilled, have both benefited from higher industrial growth of late. According to the latest Annual Survey of Industries, the annual wage earnings of an average industrial worker have risen by an annual compound rate of 7.5% during the five years from Rs 51,960 in 1998-99 to Rs 74,125 in 2003-04.

Not surprising. The productivity of labour, too has increased steadily during this period. Labour productivity, measured as per worker value of output, has grown at a higher rate of 12.4% annually compounded, during this period from Rs 9.13 lakh in 1998-99 to Rs 16.36 lakh in 2003-04. This is also reflected in the falling labour-output ratio. The labour-output ratio measures the amount of labour cost that goes to generate one unit of output. By definition, lower the ratio, the higher the efficiency of labour and vice versa.

The labour-output ratio, which has traditionally been lower in India , has gone down from 0.06 in 1998-99 to 0.05 in 2003-04. That is, to produce one unit of output, 0.05 unit of labour is required now against 0.06 unit six years ago.

Workers across the country were, however, not equally fortunate. As in the case of different industries, the average wage of workers has varied widely among the states. The workers of Jharkhand received the highest wages in 2003-04. The average annual wage in Jharkhand was Rs 1.67 lakh in 2003-04 compared to the national average of Rs 74,125. In terms of growth also, the state scored over most of her prosperous counterparts. The per worker wage earnings in Jharkhand grew by 21.3 % in 2003-04 over the previous year compared to 6.6% for the nation as a whole. In Chhattisgarh alone, the rise in annual wage earnings was higher at 26.8%. In absolute terms, Chhattisgarh had the second highest annual industrial wages at Rs 1.50 lakh in 2003-04.

   Apparently, the finding will surprise many. But if one looks at the industrial base of Jharkhand a little deeper, the result will not appear unexpected. It has a large presence of the Tata group with plants of two of its largest companies — Tata Steel and Tata Motors in Jamshedpur . Besides, the workers of the nationalised coal mines of Dhanbad region are generally well paid. The wage earnings of these workers must have influenced the overall wage structure of the state greatly.

However, if the topping of Jharkhand in the list of industrial wage payments is not surprising, the low ranking of Maharashtra , the country's premier industrialised state, definitely is. At the fifth position, Maharashtra surely has not done all that bad, but look at the difference between the wage earnings of an industrial worker in Maharashtra and one in Jharkhand! An astonishing Rs 61,530 a year or Rs 5,128 a month — an average industrial worker in Maharashtra earned Rs 1,05,561 as wages in 2003-04 against Rs 1,67,091 earned by his counterpart in Jharkhand during the same period.

Among the emerging industrial states, Andhra Pradesh did well in 2003-04 to have posted a more than 11% rise in average annual wage earnings over the previous year. Of course, even after this rise the per worker annual wages in the state was only Rs 46,683 — considerably lower than the national average of Rs 74,125.

The industrial workers of Tamil Nadu, the other emerging state, were, however, not equally fortunate as those of Andhra Pradesh. Although their wage earnings increased in 2003-04, the rate of rise was considerably lower than that of the national average — up by 3.9 % compared to 6.6% growth at the national level. In actual terms, the average annual income at Rs 57.731 in 2003-04 was far below that of the country as a whole.

And alhough the workers in Gujarat and Karnataka witnessed lower growth in wage earnings compared to that of the nation in 2003-04, in actual terms they earned much more. An average industrial worker in Gujarat and Karnataka earned Rs 79,730 and Rs 79,845, respectively in 2003-04.