Academic journal article Indian Journal of Industrial Relations

Productivity Led Wage Disparity in the Indian Industry

Academic journal article Indian Journal of Industrial Relations

Productivity Led Wage Disparity in the Indian Industry

Article excerpt

Wage Productivity Linkages

Wages are closely linked to labour productivity. Rise in productivity acts as the deciding factor for the expansion of capacity and the adoption of improved technology. The implementation of advanced technology necessitates recruitment of skilled workers and impart of training to the existing workers. However, experienced and skilled workers are available at relatively higher wages in competitive labour markets. The studies by Dickens and Katz (1986), Krueger and Summers (1986), Holzer, et. al. (1988), Katz and Summers (1988), Katz and Murphy (1991), Krueger (1991), Krugman (1994), Lowe (1995), Murphy, et. al. (1998), Krueger (1999), Jean and Nicolettiacts (2002) and Viren (2005) have been widely referred by the researchers while examining the wage structure in industries. This study empirically examines the impact of productivity as well as technology on the determination of wages in different sub-sectors of the Indian industry.

Data Source & Sectoral Classification

Data for the study were sourced from the Annual Surveys of Industries (ASI). ASI statistics classify the factories into six sub-sectors, viz. (1) Un-incorporated enterprises, (2) Corporate Sector (3) Co-operative Societies, (4) Khadi and Village Industries, (5) Handloom Industries and (6) Others (including N.R.) activities. The Un-incorporated Sector comprised three sub-sectors viz. (i) Individual Proprietorship units (ii) Joint Family (HUF) establishments and (iii) Partnership firms while the Corporate Sector comprised four sub-sectors viz. (i) Public Limited Companies, (ii) Private Limited Companies, (iii) Government Department Enterprises and (iv) Public Corporations. Since Khadi and Village industries, Handloom industries and Others (including N.R) activities constitute very small proportion of the total ASI sample population, the data pertaining to these three sub-sectors were clubbed together and analyzed under the label KVHO in this study.

The design of data collection for the ASI classifies the industries into two categories viz. (i) the census sector units and (ii) the sample sector units. Over a period of time the definition of the census sector has been revised several times in order to alter its coverage. For example, prior to 1987-88 the census sector covered all the units employing 50 or more workers operating with power and 100 or more workers operating without power. As per the 1987-88 definitions, the census sector covered all the units employing 100 or more workers irrespective of being operated with or without power. In 1998-99, the census sector was redefined to include all the units, which employed 200 or more workers and also those units, which contributed significantly to the gross output even if they employed less than 200 workers. In addition to the public sector undertakings (PSUs), the 199899 definition of the census sector also included all the factories located in the 12 industrially backward states and Union Territories (UTs) viz., Goa, Himachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Nagaland, Tripura, Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu and Pondicherry. In 2004-05 the definition of the census sector was again revised to cover all the factories employing 100 or more workers in the industrially progressive states and UTs and all the factories that were located in the five industrially backward states and UTs. It is important to note that the revision in the definition of the census sector in 2004-05 brought the public sector undertakings into the general scheme in order to cover only those units, which were employing 100 or more workers. Thus, registered factories, which remained outside the purview of ASI census sector, formed the population for ASI sample sector. For selection of sample units, some specific method has been applied to determine the sample size for individual states and UTs. It has been claimed that the revision of the definition of census sector, and identification of sample size for ASI, has been done meticulously in order to obtain the precise estimates up to state level (ASI 2002-03). …

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