Wage Policy

Wage Policy are principles acting as guidelines for determining a wage structure. Initially as an economic issue it was mainly the concern of the employer while state was adopting laissez faire policy. But, with the industrial progress and subsequent industrial balance between employers, employees, wage bargain has become a matter for three fold concern of the employer, employee, and the state In India it is built around certain cardinal principles: Equal pay for equal work Living wages for all workers so that they lead a decent life Payment of wages on appointed dates without unauthorized deductions Resolving wage related issues through collective bargaining Payment of statutory bonus at 8.33 percent as per legal provisions Ensuring a fair, equitable wage plan for various employees without significant wage differences. The capacity to pay(according to supreme court rulingan employer who cannot pay minimum wages has no right to exist Determining fair wages over and above minimum wages with due regards to (i) the productivity of labour (ii) the prevailing level of wages (iii) the level of national income and distribution (iv) the place of industry in the economy of the company. To compensate for the rise in cost of living

Economic Objectives of Wage Policy: Full employment and optimum allocation of all resources The highest degree of economic stability consistent with an optimum rate of economic progress Maximum income security for all sections of the community Social Objectives of Wage Policy: The elimination of exceptionally low wages The establishment of fair labour standards The protection of wage earners from the effects of rising prices The incentive for workers to improve their productive performance Wage Policy is a democratic set up so it cannot be enforced by the Govt alone. Its implementation has to be secured through employers and employees organizations at bargaining table i.e. by consensus Limitations of Wage Policy: Socio-economic setup of our society Enforcement in unorganized sector Lack of unity among unions Prices rise almost beyond Govts regulatory capabilities Wages lag far behind labour productivity Lesser number of workers in organized sector take away bulk of wages than unorganized Wage incomes are consumption oriented rather than savings oriented so increased wages would mean increased consumption. Therefore economic growth may not be affected positively as it depends upon rate of investment possible through savings. Ever increasing addition to workforce yet dearth of skilled labour

 High wages may force employer to shift towards capital intensive methods High wages reduce capital for growth Wage Policy in India First Five Year Plan (1951-56) suggested: Pre-war levels of real wages be restored as a first step towards living wages through increased productivity Reduction of disparities in income Reduction of gap between existing and living wages Standardization and maintenance of wage differentials to provide incentives Second Five Year Plan (1956-61) stressed: Improvement in wages through increased productivity Improved layout of plants, working conditions Application of system of payment by result Improvement in management practices Recommended settlement of industry wise wage disputes through tripartite wage boards Third Five Year Plan (1961-66) reinforced: Wage policy of preceding two plans Rationalization of work load/ work methods and functions of management Three Annual plans (1966-69) aims at framing Wage Policy after taking considering: Price level Employment level Social Justice Capital required by firm for future growth

Fourth Five Year Plan (1969-74) emphasized: Price stability Extension of system of payment by results Fifth Five Year Plan (1974-79) recommended: That the reward system in terms of wages and non-wage benefits must be related to performance records A wage structure to narrow down disparities within the organized sector itself. Govt. to intervene in setting up of wages & prices Sixth Five Year Plan (1980-85) stressed on: The need for bringing about a greater rationalization of wage structure and linking of wages at least in some measure to labour productivity. Modernization in industry Evolve wage structure without restrictions on negotiations Seventh Five Year Plan (1985-90) asserted that: There is a need for improvement in capacity utilization, efficiency and productivity Rise in levels of real income Reduction in disparities Sectoral shifts in desired directions Eighth Five Year Plan (1992-97) focused on: Formulation of wage policy relating to child labour, bonded labour, rural labour, women labour and inter-state migrant labour.