25 July, 2021

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A National Wage Policy Is The Need Of The Day!

By Rusiripala Tennakoon –

Rusiripala Tennakoon

Not many choose to get involved in highly controversial issues because of inevitable retaliations and reprisals to follow. Few dares confrontation, hence things continue unabated. National Wage policy is one such that remains an outstanding with no remedy possible for want of someone to bell the cat! Besides the objectives, concepts and considerations underlying  a Wage Policy a new requirement has arisen due to the rapidly changing land scape centered round the Covid-19 pandemic that has engulfed the globe in all spheres of the socio-economic web. I therefore decided to court danger and share some of my own experiences as well as current developments related to the field to invoke, some kind of constructive dialogue on the subject.

What Are The Concepts Underlying A Wage Policy?

A wage policy should be country specific although covered by certain basics guidelines under accepted norms such as those specified by the ILO. Wage policy is tied up with socio-economic factors prevailing in the country and determined according to the political objectives and aspirations of each country. Of the member countries in the ILO more than 90% are bound by the principles of collective bargaining and have declared minimum wages covering the majority of worker categories which are periodically revised and made applicable under the laws of that country. But a National Wage Policy encompasses many other concepts to provide for a rational and sound outlook from an economic and social point of view. In addition to a minimum wage such a policy should be reasonable, fair and ideal as basic requirements to be acceptable from a humanitarian point of view. Such a policy would contribute to ensure;

1. Industrial Peace,

2. Guarantee the smooth operations among Organized and unorganized workers,

3. Non-exploitation of workers and to fix their wages recognizing the productive capacity,

It should be noted that while the Organized sectors of workers will successfully negotiate terms and conditions applicable to their members ensuring they are not exploited while the unorganized sectors will have to be at the mercy of the employers in fixing a proper wage. Nevertheless, they face many obstacles which limit their chances of fixing a fair wage and often the government intervention is required. Especially when it comes to the question of dealing with a Living Wage it becomes important to consider several factors beyond what is provided only for the bare necessities unlike in the case of a mere Fair Wage. The guiding principle underlying the concept of a living wage is defined as, “a wage for the needs of the average employee regarded as human beings living in a civilized community and moreover sufficient not merely to provide bare necessities of life but also a frugal comfort estimated by current human standards.”

The pandemic situation has made us realize that it is the unorganized workers who play an active role in running the economy and keeping it live. Many unorthodox and make- shift arrangements are all handled by them during the crisis. Organized sectors are adequately accommodated and facilitated to maintain their normal standards (except those in the essential service sectors) while there remains much to be done in this regard in the informal sector which is growing in size rapidly as a global phenomenon.

Most importantly the main objective of an acceptable National Wage Policy is the achievement of maximum economic welfare for the society. This could be accomplished under the following conditions and requirements;

1. An equitable distribution of wealth (national income) among the members of the economy;

2. National Income to be maximized under declared policies;

3. Maintenance of sustainable stability in the national income.

To achieve these, the main objective of the Wage Policy should be, the prioritization of maximum income security for all sections of the community, with the provision of full employment opportunities and the allocation of resources optimized.

Growing Disparities Affecting Unorganized Industries And Sectors 

The Trade Unions in the Organized sectors are powerful and are traditionally involved in demanding, negotiating and concluding agreements periodically while the employers yield to their demands in fixing proper wages. We witness this often happening in a universal application and as a regular phenomenon. Even the worst affected  Estate Labor, manage to secure some improvements with strong bargaining. Formal sectors are better off in this regard and most of the well-organized industries in both State and Private sector manage their periodic revisions through the collective bargaining process. The vulnerability of the essential nature of their public services, help them to achieve exceptional beneficial terms and conditions sometimes. It is observed that this happens smoothly virtually automatically and without the parties concerned having to resort to any collision course, except for some orchestrated rare shows staged for exhibition purposes. Such negotiations appear to take a friendly discourse seemingly with hidden collusion instead of the usual collision that spring up in such instances. This is due to the exclusive situation of some of the beneficiaries themselves being involved in the ultimate decision-making process.

I am reminded of the pioneering role by Trade Unions in the past for securing very small increases with long drawn battles with much sacrifice of pay and running heavy risks sometimes of dismissal. In 1972, the banking Industry launched an island wide general strike which lasted 108 days (longest strike in the industry) demanding the equivalent of 3 annual increments Rs.6/= (an increase of Rs 18/=) ! We were threatened with not only dismissal but confiscation of our properties if we did not return to work on the 7th day of the Strike!

In such a background it is important to observe some of the current developments that we witness as incredible manifestations in the response by some leading industries and how yielding  they are for automatic periodic enhancements in their sectors keeping to a very regular and constant rate of revision in terms of percentages. Banking Industry, Electricity Board, Water Supply and Drainage Board, Ports Authority and Petroleum Corporation are in the forefront in this regard. It is to be noted that all these SOEs are either continuing as loss making institutions OR burdened with serious operational mismanagements causing national alarm. None of these negative factors have become deterrents for them to obtain their regular periodic salary increases.

But in the unorganized industries with no Trade Unions to assist them, government interference and intervention of laws of the land become essential even to ensure the payment of guaranteed minimum wages without default.

Global situation

Pandemic related issues;

In order to assure the authenticity of some information we are going to deal with, I thought of quoting from some recent presentations by the IMF at the 3rd APEC Structural reform Ministerial meeting held on 16th June 2021.   

It is recognized that the structural reform programs for global economic recovery have virtually taken a back seat and are now proceeding in a slow phase due to the break out of the Covid pandemic. Nevertheless, world authorities are focusing seriously on structural reforms considering it as a timely critical need which should take the center of any agenda of reforms following the pandemic aggravated adversities affecting the world. There is a common understanding about the factors to receive priority attention in this regard classified and summarized as follows;

* Slow progress in raising average living standards

* Highly unequal progress across demographic groups

* Alarmingly rising public debts

* Productivity (insufficient global public goods)

In a finer analysis all four determinants above have some direct reference to the degree of influence in the labor’s share in the income. It is noted that “this fall of income and its decline was concentrated on low- and middle- skilled workers” 

In this presentation attention is focused on the following labor/wage and fair income distribution related areas such as;

1. Reduced living standards, which will be due to projected GDP per capita losses averaging around 6% over the period 2020-2024.

2. Increased poverty and inequality, the projected pre-pandemic situation of almost 90 million people were estimated to belong to extreme poor category in 2020, and the pandemic has worsened this situation

3. Increase in public debts, due to recession and fiscal policy responses to alleviate hardships which situation is expected to turn worse.

In this context the global cooperation has become a pressing need and there is a necessity for an understanding by all countries to agree to a theme under structural reforms to tailor the economies to support the above considerations during the post-pandemic recovery program.

Sri Lanka situation

It will be required for us to consider the following;

* To safeguard the destruction of jobs and firms by helping them  to survive the effects of pandemic and post pandemic pressures,

* To provide liquidity support to industries including loan moratoria and providing wage subsidies,

* Postpone the implementation of revisions and increases that would normally be conducive to productivity and growth but would cause additional burdens at such hard times (as the pandemic and projected post pandemic)

* Give more priority for creation of new jobs and extend the services by more inputs into those areas,

* To minimize the growing inequalities in the wage structures and patterns among the workers in different grades in the same work place and serious disparities that will be caused between the levels of salaries in highly organized sectors and unorganized or in less vulnerable service sectors,

* To concentrate on reforms involving priorities for strengthening public finances, and supportive of disbursement of more funds to the national economy,

It is interesting to note some of the exclusive achievements by Trade Unions in some prominent State Sector Institutions. The Medical Profession is strong enough to force the {decision makers in the} government to grant the choice of the best schools for their children, in addition to the struggles launched to obtain vehicle loans, duty free vehicles and salary increases outside the normal State sector revisions process under the threat of trade union action, and to preserving the rights to private practice while engaged in public service.     

State banks are the most outstanding in this regard. Capitalizing on the glorious past struggles of their pioneers those in the industry today are enjoying the fruits of such sacrifices. In this background their maneuvers have become highly successful in the creation of an affluent class very much in contrast to the standards of the rest of the working class. Although they are attached to the State sector they constitute a unique group enjoying a package of benefits coming from a bottomless well supported by exploitative income generation schemes implemented at a cost to the customers.

Electricity is an essential commodity that no government can dare to deprive the people of even for short durations. This has made the sector highly vulnerable, sensitive and demanding often making their pressure highly effective on all successive governments. The Employees of the CEB are very much well placed compared to the others. The Government’s intention in converting it from a government department status to a Statutory Board with much liberty and autonomy, does not appear to have made any notable or significant change in converting it to a profitable venture. It is not the margin of profits in Rs they make that is important to the Public. If it can be made to run without making an operational loss by proper administrative planning and optimization of resources, they will not be answerable or held responsible to the losses incurred due to any price concessions granted by the government. But they have continued to make heavy loses. Nevertheless, the Wage increases go on in constant progression in fairly high proportions.

The situation that prevails in several other SOEs is the same ,Water Board, CPC etc. Workers privileges and rights should not be the cause for envy. But in a country where many sectors are in backlog regarding revision of terms and conditions of their employees it does not augur well for a few State sector institutions to move forward in giant strides. National Wage policies take care of such defects and address the issues in a more palatable manner addressing the extensive areas.

The ILO as the Universal Body responsible for the welfare of workers has enumerated the following objectives of a Wage Policy for the Developing Countries which would throw much light on the subject and serve as a guide for the Policy makers if they are interested in dealing with the issue in the National Interest. When there is a declared Wage Policy no sector however sensitive or vulnerable they are in providing essential services to the Public could use their strong-arm tactics to obtain the pound-of-flesh. Furthermore it will be equitable and fair any one to abide through legalized guiding principles.

ILO Objectives Of A Wage Policy For Developing Countries

a. To abolish malpractices and abuses in wage payment.

b. To set minimum wages for workers whose bargaining power is weak because they are unorganized or inefficiently organized, accompanied by separate measures to promote the growth of trade unions and collective bargaining.

c. To obtain for the workers adjust share in the fruits of economic development, supplemented by appropriate measures to keep workers’ expenditure on consumption goods in step with available supplies so as to minimize inflationary pressure.

d. To bring about a more efficient allocation and utilization of manpower through wage differentials and, where appropriate, systems of payment by results.

I wish to conclude this with an appeal to our President with a Quote from an ILO based research paper.

Quote, “A sound wage policy maintains industrial peace, satisfies both the employers and the workers, increases the output of the firm and efficiency of workers, reduces costs and maximizes profits.

An unsound or irrational wage policy is always condemned from social and humanitarian point of view. Such a policy leads to the negation of the basic principles of social justice of the working community.

Even from the economic point of view, a sound wage policy is condemned because it will affect the efficiency of the workers.” Unquote.

The success of introducing such a scheme depends on two factors; the selection of the right people for the job and taking a bold step to move forward amidst the possible prevarications.

When I met a former President and informed him about this proposal, he seemed to be well aware of the problem. Because when I mentioned the names of certain institutions affected by the problems associated with the issue he himself named a couple of other places. But Alas, it became a NATO affair, no action talk only!

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    Rusiripala Tennakoon,

    What do you mean by national wage policy?

    Does such a policy embrace all government, SOE s, non SOE s, all boards and corporations, Cooperatives and MSME s whether they earn profit or not?

    Such wage policy should deal from top to bottom to be meaningful..

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