Whence wages?  

Friday, 26 September 2014 11:15 -     - {{hitsCtrl.values.hits}}

As the days tick down to the Budget, one of the biggest interests is the hope of a salary hike, especially given it is ahead of a possible presidential election. 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 replaced 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. Despite unemployment being at a record low, as claimed by the Government, there are endless complaints of inadequate salaries by workers. These concerns are mostly displayed by the 1.4 million strong public sector, which is more unionised and feels it has a stronger voice to air grievances. Public services such as healthcare, transport and education are also essential services that have greater capacity for receiving their demands than their private sector counterparts. Therefore, a rational wage policy must effectively deal with fixing minimum wages, fixing ceiling in wage incomes, wage structure and price stability. When it comes to minimum wages, there is a need for a policy to provide a wage which would be necessary for the fulfilment of subsistence level needs. Sri Lanka’s current minimum wage is woefully inadequate to deal with current cost of living levels, and unions have consistently pushed for protection of workers against exploitation or unduly low wages. Similarly the need for a wage ceiling is advocated to check the upward inflationary trend of the wages. It is argued that the wage should be related to productivity. In order to achieve the objectives stated above, a policy must provide for a wage structure. It refers to a set of relationships between rates of pay for different groups of similar occupation. The past efforts in this direction were not very encouraging mainly because of the wage differentials that exist in Sri Lanka. The spread of wage and salaries in developing countries is extremely wide. The wages structure must also contribute to price stability. 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. Elections, however, could set the levels this time around.