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Use of Marginal Productivity as Wage determination in Apparel Sector

Dr. Rajeshwar Nath, Associate Professor, Inmantec Business School , Aqib Sewar (student

Preface
The most promising industry in the world has been The Textile Industry. Infact the earliest industrialization has taken place here as it is agro based and fulfill the needs of people. The strikes and lockouts has become a common phenomenon because of it being a labour intensive industry. Conflict with management over any issues which advocator of the working class sense is detrimental to labour,, demand for a change in the policy with united support of the working class there. In India the 8 s has passed through this phase when initiator of the lab our grievances rose to a prominent figure with the huge support of the labour class. The struggle at that time became contagious and work at almost all textile mills in !umbai came to halt. !any have to sift to other places as it was taking a long time to settle and capital invested was sinking. "radually it called for some changes in the labour policy but has seeded a bitter taste in relationship with management. This article is all about the struggles which failed to find an e#uitable solution. The Indian textile$ and apparel sectors comprise the second largest employer after agriculture, with more than %% million persons engaged in this industry. In & '( ), it contributed $ per cent to "*+, $) per cent to the total exports and 8 per cent to the total manufacturing output of India ,based on calculations from the -nnual .urvey of Industries and *irectorate/"eneral of 0oreign Trade, India1. 2y virtue of being among the earliest established industries in the country, and being a ma3or sector responsible for rapid growth of the newly industrialized countries, in addition to the data given above, the textile industry plays a significant role in the Indian economy. This industry has a rich past in India, in addition to its dimensions in culture and heritage, so much so that any study of Indian history would be incomplete without a detailed treatment of the country4s textile trade. Textile production has been an integral part of the lives of millions of poor people, including farmers, in India for centuries.% In addition, textile production has backward linkages with agriculture and allied activities, at least in the case of natural fibers. - strong and diverse raw material base, cheap labour, an ever/growing domestic market and relatively better technologies' than some of the other developing countries are the key strengths of the Indian textile sector that have resulted in such a pronounced prominence of this industry. The development of a modern textile industry in India gained momentum after a similar trend in 2ritain, owing to the availability of indigenous cotton, cheap labour, access to 2ritish machinery and a well/developed mercantile tradition in India. 2riefly, some fundamental features of the Indian textile and clothing industry are5 $. The textile sector includes spinning that involves producing yarn from fibers, weaving that &. involves manufacturing fabric from that yarn, and processing that involves chemical treatment and colouration of yarns and fabrics for durability as well as aesthetics. %. The apparel sector includes the processes that result in the manufacture of readymade garments from fabrics. '. - comprehensive study of Indian textile history is given in 6oy, $778. ). 0or example, 9akshmi !achine :orks, India, is one of the largest textile machinery

manufacturers in the world. The presence of companies such as these has ensured that many advanced technologies are accessible to Indian industry.

Literature review
-s !r 6a3eev .hah has mentioned in his article to The times of India on the current status of the textile industry in the state of "u3arat in India. The three/week/long strike in four textile mills of -hmedabad in ;une, involving 8, workers, does not find mention in the official statistics on man days lost. The latest figures, obtained from the labour commissionerate, show that in the first six months of this year, 3ust about $ ,%78 man days were lost in "u3arat. 9abour experts say, if the workers< strike in the textile mills is taken into account, the actual man days lost in "u3arat would reach around $.% lakh, a tall order. Considering that the workers went on strike for & /odd days, the -hmedabad textile sector alone would account for $.& lakh man days lost. 9abour expert +rof =idyut ;oshi said, >This is apart from sporadic man days lost because of the refusal of large number of workers to work in .urat<s small/scale powerloom sector, involving about $) lakh workers. The workers there spontaneously stop work due to poor conditions. They are no I* cards. They are made to work for $& hours.> - top labour department official conceded that the $ /day strike in .urat in ;anuary & $$ involving a big portion of $) lakh workers in the powerloom sector, was never counted as >man days lost>. "iving reason for refusal to count the textile sector, state labour commissioner ? @ 2hatt said, >This is because the textile sector does not fall under the Industrial *isputes ,I*1 -ct but under the 2ombay Industrial 6elations ,2I61 -ct, under which all disputes are supposed to be handled by the trade union founded by !ahatma "andhi, the Textile 9abour -ssociation, or !a3ur !aha3an.> Trade unionists find the explanation strange. 2elonging to -hmedabad, -shim 6oy of the @ew Trade Anion Initiative, said, >-n industrial dispute is an industrial dispute, whether it is in the textile sector or any other sector.> +rof ;oshi adds, >:hile counting man days lost, government only takes into account registered trade unions. Thus, most of the small scale sector falls outside the purview of man days lost.>

A huge ailing public sector5


! A recent trend amon" manufacturers of ado#tin" e modern techniques$ and ! %he e&istence of a number of re"ulations and a #referential tariff structure (fa'ourin" natural fibres and con'entional means of #roduction . Des#ite bein" amon" the world leaders in te&tile #roduction in ()*+ and the fact that India has a self,reliant 'alue chain of te&tiles, the countr- had been steadillosin" "round in the world te&tile mar.et, to"ether with a loss of im#ortance in industriali/ation at home. %he decline of the Indian te&tile industr- is 'ercons#icuous relati'e to the countr-0s other industries as well as the te&tile industries of other countries in the de'elo#in" world, as is e'ident from the stee# fall in the share of Indian te&tiles in the international mar.et and in total Indian e&#orts. In the ())+s, the Indian te&tile industr- faced a se'ere recession, both in terms of em#lo-ment as well as in the number of o#erational mills1factories, which continued durin" the mid,()2+s and ())( des#ite fundamental chan"es in the tariff structure

amon" other #olic- as#ects. Althou"h s-m#toms of reco'er- ha'e been of late, owin" to the mar.et e&#ansion resultin" from the #hasin" out of 34A quotas, there was an astonishin" decline in e&#ort "rowth from more than (5 #er cent in 6++*1+5 to (+.*7 #er cent in 6++51+8 (3inistr- of %e&tiles, 6++8 . Durin" the #ast few decades, numerous te&tile mills ha'e been declared ailin" and ha'e been closed. 9owe'er, man- of the mills under the National %e&tile :or#oration continued to o#erate, des#ite losses, owin" to the lar"e number of em#lo-ees in'ol'ed. ;'en in the #ri'ate sector mills, em#lo-ment has been a major issue. Althou"h the sector has lar"el- reco'ered, its #erformance #ost,34A has not been encoura"in". A wide ran"e of re"ulations in the te&tile industr- in'ol'in" bureaucratic difficulties in e&#ansion and the hi"hl- distortional tariff structure were #artl- res#onsible for this stead- recession. 4or e&am#le, han. -arn obli"ation5 required the s#inners to allocate a fi&ed #art of their #roduction to handloom wea'ers. %his not onlrestricted the #rofits of s#inners, but also raw material access and costs for wea'ers and others further u# the 'alue chain. %he reser'ation of the "arment sector8 under the Small, Scale Industr- Act had restricted lar"e,scale in'estment in this sector, which led to hu"e losses in efficienc- that could ha'e been otherwise achie'ed beconomies of scale. In the informal or unor"ani/ed a##arel sector, which is #ro"ressin" well, the #rocesses are not #lanned and s-stematic. %he wor.in" conditions are not satisfactor- as the labour re"ulations cannot be enforced and a hire,and,fire #rinci#le is in #lace. %his is true e'en in a #art of the or"ani/ed sector, wherein the manufacturers recruit contract labourers in order to minimi/e the losses the- face due to the infle&ible labour re"ulations #re'entin" them from firin" their #ermanent em#lo-ees e'en durin" recessions. In fact, some studies ha'e obser'ed a ra#id "rowth of the informal sector in the te&tile industr-, es#eciall- after the reforms of ())(. %able (. A'era"e annual "rowth rates in the or"ani/ed te&tile and a##arel sector in India (())71)< #rices P;RI=D =ut# ;m#lo-m ut ent *.+7< +.<)5 Real >a"es 6.<28 Real fi&ed ca#ital 7.5<* <.5<7 2.2+6 (8.88< 2.(( 6.87

()5(156 to ()8+18( ()8(186 to 5.552 7.6)* 6.226 ()2+12( ()2(126 2.(8< ,+.)52 *.<< to())+1)( ())(1)6 5.8(2 +.))8 6.782 to()))1++ ()2+12(to *.7< ,*.(8 *.7* ())81)2 6++(1+6 to 2.)+ <.8) *.(2 6++<1+* Source calculation from Annual sur'e- of industries

%rends in some ratios of ca#ital (? -ear ()871 8< ()2+1 2( ()2*1 25 ())+1 )( ())81 )2 6++(1 +6 6++<1 +* SourceA Author0s calculations from

%able 6. , out#ut (@ and em#lo-ment (N @1? ?1N @1N 6.*5 <.*6 ((.5 ) 7 (5 7.5* <.75 (*.) 8 < *2 7.+) 8.77 66.5 6 ( 5< 7.5( (+.7 78.7 < 76 75 (.*< 7<.( *6.8 5 66 5 (.<+ 7.)5 5.<< 7 ) 7 (.88 <.<6 8.25 8 5 < Annual Sur'e- of Industries.

In 6++(1+6, ca#ital #roducti'it-, ca#ital intensit- and labour #roducti'it- had fallen shar#l-. ;'en thou"h there had been a sli"ht increase in all these measures b6++<1+*, this is a serious #roblem "i'en the fact that the international mar.et is becomin" more and more com#etiti'e, requirin" hi"h #roducti'it- and ca#ital intensit-. :a#ital #roducti'it- (@1? was quite stable from the ()8+s until 6++*, 'ar-in" between (.< and 7.8. 9owe'er, there are bul"es in ca#ital intensit- (?1N as well as labour #roducti'it- (@1N . Stri.in"l- hu"e increases for these 'alues durin" ()2*125, ())+1)( and ())81)2 could #ossibl- be a result of a ra#id fall in em#lo-ment, which is in the denominator for both these measures in this #eriod, as can be inferred from table (, the "rowth of em#lo-ment b- 6++(1+6 mi"ht ha'e offset the unusuall- hi"h rise in these ratios before, thus e&#lainin" the fall in these ratios to much lower 'alues. 9owe'er, a not,so,hi"h "rowth of ca#ital since 6++(1+6 led to increase in ca#ital #roducti'it- b- 6++<1+*, while an im#ressi'e out#ut "rowth rate caused a rise in both ca#ital and labour #roducti'it-. In the recent -ears, most of the #rotection measures ha'e been brou"ht in as a #art of the reforms. %able 7 shows effecti'e rates of #rotection for different subsectors of the te&tile industr- o'er the #ast few -ears. %he measure used is based on Das (6++7 , who defined the effecti'e rate of #rotection as a measure of the e&tent to which a sector is sheltered from forei"n com#etition. S#ecificall-, this is based on :orden0s formula and is the #ercenta"e e&cess of domestic 'alue,added, 'is,B,'is world 'alue,added, introduced because of tariff and other trade barriers. %his measures the distortion introduced due to tariffs on the in#ut #rices as well as the final out#ut #rices, and it therefore measures #rotection of domestic factors of #roduction. %his measure of #rotection is used,

because it not onl- ca#tures the absolute le'el of the effecti'e rate of #rotection of each sector, but also accounts for the intersectoral differences in #rotection mentioned abo'e. It is e'ident from table 7 that #rotection has fallen in all subsectors, and that this reduction has been stri.in"l- shar# in cotton .hadi and handlooms. A fall in #rotection ma- ha'e im#lications for em#lo-ment to the e&tent that #rotected industries that tend to lose because of a fall in #rotection are em#lo-ment,intensi'e. %able 7
#eriod ()5(,56to ()8+,8( ()8(,86 to ()2+,2( ()2(,26 to ())+,)( ())(1)6 to()))1++ ()2+,2(to ())8,)2 6++(1+6 to 6++<1+* out#ut *.+7< 5.552 2.(8< 5.8(2 *.7< 2.7+ em#lo-ment +.<)5 7.6)* ,+.)52 +.))8 ,*.(8 <.8) Real wa"es 6.<28 6.226 *.<< 6.782 *.7* *.(2 Real fi&ed ca#ital 7.5<* <.5<7 2.2+6 (8.88< 2.(( 6.8*

.ome of the subsidies currently extended by the Indian government to promote exports which are sector specific ,TA0, 8 BBC1 or region specific ,C+D., CEA.1 may also need to be withdrawn.

%able <
(4i" in CS D 3n

1994

1998

!!

!!"#

!1!#

$arn

"9!

1%8!

!!&

1 '

Made(ups

8"1

1498

!&8

4 %

&!98

)a*ric

1 14

1%1'

19&1

!"!

1"4

+arments

&%1&

48 9

"4&"

"9&9

'88"

Total

6368

9823

11408

12542

14159

Conclusion
Ase of marginal productivity as a measure to wage determination
%he Indian te&tile sector has three #arts (. S#innin",#roducin" -arn from fabrics 6. >ea'in",in'ol'es manufacturin" fabric from @arn 7. Processin",colouration of -arns and fabrics for durabilit- as well as aesthetics

BankyarnobligationFre#uired the spinners to allocate a fixed part of their production to handloom weavers. -fter coming into effect in $7G' it was fixed at ) per cent of the total marketable yarn reduced to ' per cent then to & per cent in & %. In the informal or unorganized apparel sector, the processes are not planned and systematic. The working conditions are not satisfactory as the labour regulations can not be enforced and a hire and fire principal is in place. 0rom the table$ it has been inferred marginal productivity of labour $78$/8& to $7G /G$/growthin marginal productivity was $ .$'7/ growth in real wage&.'8G again in $7G$/ G& to $78 /8$ growth in marginal productivity of labour was &. &%8 where as growth in real wage was &.88&more than needed. :e can understand the turbulent phase could be $78$/8& to $7G /G$ when labours were not paid and were exploited. -gain in the period $78$/8& to $77 /7$ the growth in marginal productivity of labour was 8.7 where as the increase in real wage rate was only ).''. - partial exploitation of labour. -gain in the phase $77$/7&to$777/ the growth in marginal productivity of labour was 8.G%& where as growth in real wage was only &.%G8 hence labours were not well paid for their contribution in these days. :here as in contrast to those early days the growth in marginal productivity of labour was only $.8) in & $/ & to & '/ ) where as the growth in real wage rate was ).$ here the labourers are paid more than re#uired considering the table & In India the textile industry is labour intensive'. -nd with up gradation in technology/ till $77G/78 capital(labour out was increasing but after & $/ &to & '/ ) it shows a declining rate of growth that calls for technical up gradation. 0rom the table ' it can be concluded that for the corresponding period in & '/ ) average productivity of labour was&.%7& where -s for the same corresponding period the marginal productivity of labour was $.8). Infact !arxian concept that labours are the real producers and concept of collective bargaining revolves around this. Collective bargaining because most of the work force do not raise their voice for their raise of wages, and for partners in profit or against working conditions. It provide a platform for their upliftment.

Infact of all the theories of determination of wages this seem to be conducive . :age fund theory was an ad3ustment theory that it is already decided thatwhat sum of money will for wages of labour if less workers it will go for other purposes if more workers it has to be ad3usted according to that. .ubsistence wage theory was a frown expression of management upon workers which consider them to a class which can not come out from the vicious circle of poverty. +roponents of living standard theory was basically a minimum expenses on worker as their urges and wants are confined to their basic needs and they will remain confined to their existing standards of living withor without less raise in wages. *emand and supply theory decided that as in those time labours are more in supply but industries were numbered and also according to -rthur lewis model their was migration of labours from agriculture to industry rural to urban and knows well they can not afford to remain unemployed for a week that was already too much at that time. E00 all these theories marginal productivity theory was based and linked the works to efficiency

ReferencesA Das D?.6++7,EFuantuf-in" trade barriersE wor.in" #a#erNo(+*, Indian council for research on international economic relations, New Delhi Goswami, =,())+, H Sic.ness and "rowth of Indian %e&tile Industr-AAnal-sis and #olic- o#tions ;conomic and Politic'al >ee.l-, 'ol 6*, no << ## 6<6),6<7) 3inistr- of %e&tile6++8 re'iew note o+n "rowth and in'estment in %e&tiles durin" 6++5,+8;conomic Di'ison New Delhi