Thursday, 17 April 2014 00:00
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Trade unions have submitted nine proposals to the National Pay Commission appointed by the President to assist the Government in formulating a National Wage Policy and provide more security and equitable distribution of wealth within the country.
The trade unions have proposed a national minimum wage for private sector employees and to implement an unemployment benefit insurance scheme as well as a pension scheme for Employees Provident Fund members and a social security scheme for the informal sector. Another proposal is to set up a National Wages Commission for the private sector.
One of the highlights of the 2014 Budget was the formation of a special commission to formulate a national wage policy. This task of paramount importance needs to be centred on basic goals such as reducing the relative poverty of the working class through equitable distribution of wealth and reducing politicisation that could over time confuse or dilute this framework.
The 19-member National Pay Commission will replace the National Salaries and Cadre Commission to understand how to bridge disparities between public and private sector salaries as well as reduce the Government’s large pension bill. The latter will obviously cause much concern in a country with a rapidly ageing population that has limited alternative options such as insurance and flexible policies that allow elderly people to work for longer.
The Commission is tasked with compiling a report by observing the current issues and bottlenecks as well as providing answers. While it must be accepted the report may not be embraced by the Government in its entirety, the Commission has a massive responsibility to ensure the right path is set out to finally provide equitable salaries and benefits to all working people.
So far the trade unions are predictably engrossed with pushing into place a salary that will withstand the demands of inflation. The trade unions have suggested the basis of private sector minimum wage should be the present public sector minimum wage amounting to a healthy Rs. 21,876 inclusive of allowances for increases in cost of living and inflation.
Further, the unions have pointed out that when arriving at a decision on the minimum wage of private sector employees, the Commission should consider the 2012/2013 Household Income and Expenditure Report of the Department of Census and Statistics which has calculated the average required income of a family of four as Rs. 48,281. It has also been proposed to the Commission to review the national minimum wage periodically and revise the same in step with the rise in cost of living and inflation. These are all progressive steps even though employers in the private and informal sectors might not be very willing to meet these numbers unless the proposals are linked to productivity. Implementation and monitoring also pose a challenge as does balancing larger macroeconomic goals.
A rational wage policy must effectively deal with fixing minimum wages, fixing ceiling in wage incomes, wage structure and price stability. The latter two points require great Government dedication. Economists regularly argue that increased wages result in inflation. Conversely unions contend inflationary pressures are varied with measures such as reckless deficit financing and easy credit policy also resulting in spiralling cost of living.
Therefore, while the Commission can suggest salary frameworks, it is up to the Government to make sure that it keeps the country’s economy in order so that rampant inflation does not outmode the system. Enforcing even some of these policies will require economic and political dexterity largely unseen by the Government but essential if growth targets reducing glaring income gaps.
