Implications of salary increment in the private sector
Thursday, 29 January 2015 00:00
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This is in response to the article formulated by the Employers Federation of Ceylon (EFC) warning the Government of the implications caused by a salary increment. (Daily FT Page 1 of Tuesday 27 January and web http://www.ft.lk/2015/01/27/employers-caution-govt-over-ad-hoc-arbitrary-pay-hike-moves/)
I am humbled by the request they have made to the Government without forcing the idea and they have correctly said that the salary discrimination should depend on the industry and the market conditions. Furthermore, they have stressed the fact that the Government should help them employ more people and make them permanent.
First and foremost I am utterly disappointed at the fact that such a big matter was just discussed plainly without any proper base in just one small article. This is a very important discussion and such a vague article to the president requesting him to think twice about the salary increment should be shredded.
Let us examine each point that they made in their article and have a discussion.
The first point they made was that the private sector and public sectors are different. My point is does it have to be different.
America’s postal service is a public sector organisation and it has gone international, why can’t we have institutions like that? Therefore that point does not make much sense because if the people of Sri Lanka try to change their mindset we can beat any developed country in this world.
They extend that same point by saying that salaries depend on so many different factors but they forgot to mention that salaries depend upon whether the job is white collar or blue collar in its nature.
They also mentioned the fact that interventions previously have caused problems. Well they just have taken only one example of intervention without even mentioning properly what were the adverse effects.
Furthermore, collective bargaining mostly happens in the public sector where as the private sector rarely has that concept even if they had that, the trade union in the private sector is not that powerful. Therefore Government intervention is very important.
They also mentioned the fact that 200,000 employees are working in the plantation sector and that their costs are so high. They should know that there are two different types of jobs, one being blue collar and the other being white collar.
The salary can be increased accordingly so that the cost is still 70%. Maybe cut the benefits of the higher authorities and give more benefits for blue collar jobs. Without differentiating the jobs category it’s tough to compare salary scales and increment therefore the EFC should have done that first without vaguely saying that the plantation sector employs 200,000 people.
The second point states that they have moved away from linking wages to the cost of living index. Did a messenger from heaven come and tell them not to link the cost of living and wages. How can they do that? Do they think people come and work for fun?
When I went to Singapore recently I experienced the cost of living to be close to Sri Lanka’s. However even the bus driver earns 1000 dollars. Their living standards are very high. That is because they have properly defined white collar jobs to blue collar jobs and proper pay for what they deserve and in turn they have more productivity.
The third point mentions that employees should be made permanent and the Government should give priority to employ more people. Are they saying that they cannot increase salaries but they can hire more people for low salaries? Is that the definition of productivity?
I am a novice social science student and even I think that it is better for a company to hire one person who can do the job in a productive manner than hiring 1000 people who cannot be productive. The country needs to develop, it needs to improve productivity and not just hire people and make the country less productive. I would suggest hiring good talent and paying them well for then we will be creating Fortune 500 companies soon. With the current mentality we will never have Fortune 500 companies in Sri Lanka.
In conclusion, I would prefer if the country can push consumption up by increasing salaries and reducing taxes on essential products. If you take America, Singapore or any other developed country, they want to push the consumption up for then only will a country develop. Consumption is a very important factor when it comes to the GDP growth of a country. This will allow people to buy more things and save more and hence more businesses will grow while the savings component can be turned into sustainable investment.
I would like to suggest to the Government that it push for salary increments with the vision of increasing consumption which in turn will improve money circulation which in turn will help form a trickledown effect.
