CHAPTER – 1

INTRODUCTION

Wages are a payment for the service of labour, whether physical or mental.
Traditionally the remuneration paid to manual workers is known as Wages. It is different
from the salary which in accounting and economic terms is paid to non-manual workers.
Wages which are paid directly to the labours , either in the form of piece rate or time rate
( hourly or weekly basis) whereas indirect labour is taken in account for the payment of
salaries in the form of time rate (monthly basis). These days even the manual workers are
paid salaries who are employed in the factories.

Instead of dilating on the niceties of Salaries and Wages, it will be appropriate to

make a detailed conceptual analysis of wages.

Wages, a conceptual analysis

Wages are commonly understood as a price for the services of labour or as a

payment that is made by an employer to his workers or employees as allowance of their
work that they have rendered for the employer. This allowance may be weekly, fortnightly
or monthly. Thus, wage means any monetary amount given by an employer to his
employees for their services. Benham defines wages as Wages are sum of money paid
under contract by an employer to a worker for the services rendered.1

Wages are the remuneration for the expenditure of effort in production of goods &
services. The efforts of wage earner may be physical, mental or a combination of the two,
it may be under another‟s direction or may be a managerial & decision making character.
But whatever his specific occupation, the wage earner supplies some form of human
contribution and wages are reward for his contribution.2

Wages represent the major if not the sole source of money for a large portion of
wage earners and constitute an important element in the cost of production, more often it
becomes a source of industrial conflict also. Wage behaviour, therefore, concerns the
workers, mangers and the policy makers.3

In precise economic terms, wages are price of labour, and in the absence of control,
they are determined like all prices, by supply & demand.4
1
 The wage means all types of earnings (salary, allowances, increment etc) it can be
in the monetary form, which is a element of job, and it is provided to a person in the return
of his service.

Wages are also a means of providing income for employees and as a cost of doing
business to the employer. In a wider sense, wages mean any economic premium paid by
the employer under some contract to his workers for the services delivered by them. In this
way wages constitute of financial support, family allowance, relief pay and other benefits.
Whereas in the narrow sense, wages are the price paid for the services of labour in the
process of production and it count only the wages proper or performance wages.

Wages can be shown in two different ways viz-Nominal wages and Real wages.

Nominal wages are those when they are exhibited in terms of money paid to the
worker while when they are expressed in terms of purchasing power with reference to
some base year they are termed as real wages. Real wages are arrived at by making
adjustment in the nominal wages for the rise or fall in the cost of living index. Thus, if the
nominal wages of worker in 1988 was Rs.400 p.m and 1999 it is Rs.900 p.m but if the cost
of living in 1999 has become thrice as in 1988, the real wages of the worker in 1999 is Rs.
300 only. Wages can also be a source of motivation to employees to perform their duties
effectively and efficiently. The term “wages” has been defined by the payment of Wages
Act, 1936 (as amended) as remuneration in terms of money which would be payable on the
basis of the contract of employment but which does not include the following:-

a) Value of house accommodation, supply of light, water etc.

b) Travelling allowances or value of any travelling concession.

c) Any sum paid to defray special expenses

d) Any gratuity payable on discharge unless payable under any law, contract or
instrument which does not provides for the time within which payment is to be
made.5

The wages rates of the working class are one of great significant to the workers and
also to the society as a whole. Wages determine the standard of living of the wages earner
and his family as well as his status. Higher rates of wages in the economy are the real

2
indicator of the level of advancement, growth and prosperity in the society while lower
rates are prevalent in regions which are economically backward and socially depressed.
So, wage rate determine standard of living, status and position of the workers in the
society. In India, progressive and decent rates of wages are very necessary because indirect
benefits in the form of social services and either limited or non-existent. Wages also act as
on instrument for achieving and greater satisfaction. It also relives individuals from
financial worries and thus enables them to put forward the best efforts on their jobs.
Individuals are likely to work effectively if the prevailing reward system provides
equitable earnings of their efforts. In other words, wages constitute a major factor in
attracting, stimulating and retaining employees at all levels. They are also a principal cost
in an organizations operation. Wages are also a significant contributor to the national
income. Wages are the source of as well as medium to the solution of most of the labour
problems.

Statistically it has been revealed that wages have been one of the most significant
factors in India which affect industrial relations. Wages are also a indicative contributor to
the national income in economy like ours. Wage are the considered to be the biggest source
as well as medium to the solution of most of the labour disputes and problems.

The study of wages will be incomplete unless different concept of wages are not
analyzed which have a bearing on wage determination. Wages can broadly classified into
three different types –

a) Living Wages b) Minimum Wages c) Fair Wages

Living wages

Living wages are defined as that wages which are consistent to provide certain
facilities as well as some basic necessities to the employee. So, it means that wage level
which is satisfactory to provide for the basic necessities and such niceties that are advised
necessary for the betterment of the employee as well as his family in accordance with his
social status. Thus, living ages has been defined as follows:

The living wage should enable the male earner to provide himself and his family
not merely the basic essentials of food, clothing and shelter but a measure of frugal

3
comfort including education for the children, protection against ill-health, requirement of
essential social needs and measures of insurance against old age.6

Article 43 of the Constitution of India states that the state shall endeavour to secure
by suitable legislation or economic organisation or in any other way to all workers,
agricultural, industrial or otherwise work, a living wage, conditions of work ensuring
decent standard of life and full enjoyment of leisure and social and cultural opportunities.7
So, the government of India has adopted as one of the directives of the principle of state
policy to ensure living wages.

Living wage is a wage sufficient to ensure the workman food, shelter, clothing,
frugal comfort, provision for evil days etc. as regard for the skill of an artisan, if he is one.8

Thus, Living wages does not mean to fulfill only for the basic necessities of life to
employee such as food ,shelter and clothing, but also it include for some comforts, leisure
and amenities estimated by current human standards such as health, education of children,
travelling, old age, recreation and social needs etc.

Minimum Wages

Minimum wages are that lowest wages necessary to maintain an employee and his
family at the minimum subsistence level, which includes food, shelter and clothing.
Generally when government fixes minimum wages in a particular trade the main motive
not to control or determine but to counter the employment of workers at a wage below an
amount necessary to maintain the worker at the minimum level of subsistence.

According to Fair Wages Committee, Minimum Wages should provide not only for
the bare necessities of a worker. It should also provide for the maintenance of efficiency of
the worker. It means that, minimum wages must be sufficient to provide for all
requirements of health, education and other essential amenities.9

In India the business organizations and trade unions play an important as well as
significant role in fixation of minimum wages in the country. The law and administrative
commission related to the minimum wages for its determination and setting of them make
time to time reviews to determine the minimum wages in accordance with the varying
economic conditions, for example change in the price level should be compensated with

4
the change in the wage rates because the main aim of the minimum wage law is just to
cover "minimum living cost." The authority authorized with the responsibility of fixing of
minimum wage should consider factors like the size of the units in the industry,
transportation cost and local economic conditions in fixing minimum wages. In 1948 the
Government of India passed a Minimum Wage Act under which farm labourers were to be
paid a minimum wage between 66 paise and Rs. 1.50 per day, considering local costs and
standards of living. Practically, it was very difficult to enforce minimum wages
effectively. Well, due to the recent inflationary situation which had pushed up the rural
wages much above the minimum wages fixed by law.

There are two methods to determine the minimum wages that is direct and indirect
method. Direct method is that in which for the determination of minimum wages, the
government follow some steps like to appoint wages boards and to determine minimum
wages while Indirect method is that method in which government determine minimum
wages for the workers working in government departments and workers working on a
contract, the government lay down a condition of minimum wages in contract deed.

Fair wage

Fair wage means which is something more than the minimum wages. It is a mean
between the minimum wage and the living wage. So, the lower limit of the fair wage must
surely be the minimum wage whereas the upper limit is the fair wage which is capacity of
the industry to pay further the comparisons definitely with the average payment of same
work in other occupations or trades which requires the same amount of ability. Basically, it
is economic position and its future prospects on which fair wage depends. Further , there
are certain factors like minimum wages, capacity of the industry to pay, level of national
income and its distribution, productivity of labour, the place of the industry in the economy
of the country and prevailing wage rates in the same or similar occupations in the same or
neighbouring localities on which fair wage depends.

Fair wages mean the remuneration which is paid to the workers for the jobs
requiring equal efficiency, difficulty and pains.10

5
A Brief History of Wages in India

The Government of India passed the Employer„s and workmen„s (Disputes) act in
the year 1860. It provided for penal sanctions for breaches of contract by workers. Along
with this, it was also designed and to measure the secure settlement of wage disputes by
magistrates. The Royal Commission on Labour found that the act had not in use in the year
1929. Therefore in 1932 the government replaced the act. The Government of India
prepared a bill in the 1924 on industrial disputes including the setting up of Wage Board
which was further based on the investigation by the government of Bengal and Bombay in
1921 and 1929 respectively. For the settlement of industrial disputes the Indian Trade
Disputes Act 1929 provided for setting up courts of inquiry and boards of cancelation. In
order to bring labour and management together to settle disputes some provincial
government assumed statutory powers to intervene in labour management disputes. All
these developments made a marvelous contribution towards the evolution of a wage policy
which further aimed at protecting wages. In 1936, the first direct step in this regard was
taken when the payment of wages Act was passed.

With the outbreak of second world of Second World War, under the Defence of
Indian Rules to ensure uninterrupted industrial production, the government assumed more
powers. According to the Rule 81A of the Defence of Indian Rules issued in January 1942
which provided government more powers to issue special orders or make rules to restrain
lockouts, stricks and any dispute including wage disputes to adjudication or cancellation.
To promote settlements of industrial disputes the board features of these treasures were
later incorporated in the industrial Disputes Act of 1947 and agencies like cancelation
officers, Industrial Tribunals, and Labour Courts etc were set up by the Government.
Further a five year programme legislative and administrative action in the field was
announced in September 1946 by the interim Govt., which included:-

1) Minimum wages in Sweated industries with Statutory Prescription.

2) The determination of differentials in wage rates as between various occupations in

an industry and standardization of wages and occupational terms in all major
industries.

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3) With due regard to the capacity of the industry to pay, and further there was
promotion “Fair Wage” agreement.11

An Industrial Truce Resolution was adopted unanimously in December 1947, the

government convened a tripartite conference. The main idea of the Resolution was to
formulate measures to meet the rapidly deteriorating relations between management and
labour and further to increase industrial production according to this Resolution , the
system of remuneration to capital as well as labour must be so devised that while in the
interest of the consumers and primary producers , excessive profit should be prevented by
suitable measures of taxation and otherwise both will share the profit of these common
effort after making provision for payment of fair wages to labour , a fair return on capital
employed in the industry and reasonable reserve for the maintenance and expansion of the
undertaking.12

On 6th April 1948 the Industrial policy resolution announced and which further
emphasized:-

1) In sweated industries fixation of statutory minimum wages.

2) In organized industries there is promotion of Fair Wage agreements.13

It made more clear and essential criteria to identify a Fair Wage. So in the first
session (1948) of Central Advisory Council appointed a Tripartite Committee on fair
wages consisting of employees, representatives of employers and government to report and
enquire into the subject of fair wages of labour.

In India the government actually participates in wage setting. The government

started providing guidelines for wage structure as well as wage determination by following
the recommendations of the 1948 committee on the fair wages. In Indian context tripartite
Committee means, "The Committee on Fair Wage" was set up in 1948 to provide
guidelines for wage structures .The report of this Committee was a big milestone in the
history of formulation of wage policy in India. Its recommendations set out the key
concepts of the 'living wage', "minimum wages" and "fair wage" besides setting out
guidelines for wage fixation. Article 39 states that the State shall, in particular, direct its
policy towards securing

7
(a) that the citizen, men and women equally shall have the right to an adequate
livelihood and

(b) that there is equal pay for equal work for both men and women.

Article 43 of Indian Constitution states “living wage, etc., for workers- The State
shall endeavour to secure by suitable legislation or economic organization or in any other
way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of
work ensuring a decent standard of life and full enjoyment of leisure and social and
cultural opportunities and, in particular, the state shall endeavour to promote cottage
industries on an individual and cottage industries on an individual or co-operative basis in
rural areas.14

Characteristics of an ideal wage system:

Wages are paid to the employees or workers as a reward for their service or labour.
There are many systems of remuneration have been devised for meeting the requirement of
both employers and employees. There are two basic system on which paying remuneration
to the workers or labours is determined .One is attached to the time component and other
attached to the quantum of work done by workers. Thus the wages are paid to the workers
for the time spent in an organization or the goods and services produced for it. The
willingness, productivity and co-operation of the workers depend to a large extent upon the
wages enforced in the enterprises. So, the wage system must be planned, sound and based
on some principles. The most suitable wage system is one that reduces the labour cost per
unit while increasing the output and giving a fair return to workers. Therefore, the system
of wage payment must be highly satisfactory and to introduce a fair wage. Wages equal to
that received by employees performing equal work and having equal skill termed as Fair
wages. An ideal system of wage payment should possess several characteristics features
like simplicity, certainty, quality output, uniformity, distinction between skilled and
unskilled workers, guaranteed minimum wage, minimization of labour turnover, incentive
to work, adjustment to price changes etc.

To determine the rate of wages and salaries is one of the important and difficult
problems of personnel management. Determination of wage rate is a basic problem of an
organization. For maintaining satisfactory relation between labour and organization,

8
personnel management has to develop a standardized method of wage payment that may be
helpful in maintaining and controlling the cost of production in establishing a equitable and
fair remuneration for the employees and workers, in motivating the employees the workers
to increase the production and productivity.

Wage Variation / Varieties

Wages levels differ from one to another and relative difference in wage levels is
called wage variation or varieties. Hence, there are differences in wage rates. There are
various factors like political, behavioural, ethical, social and economic factors on which
wage levels depends .There are three types of variations or wage varieties in wage rates

Regional Variation: Regional Variation means different wage rates in difficult

regions for the same work in the same industry. This may be due to several factor such as
demand and supply of the workers, cost of living index, standard of living and economic
development

Time Variation: When wage rates changes according to time that means changes in
wage rates due to time which is termed as time variation. It is only the economic
conditions of the country which determine the different wage rates time to time. In
inflationary pressures the wage rates are high, whereas in slump period may be low.

Industrial Variation: When one industry may pay more or different wage rates to
its workers in the same region for similar work that is called Industrial Variation. Wages
may differ from industry to industry. Various factors such as nature of work, demand and
supply of skilled labour, place of industry in the national economy and working conditions
in the industry etc influence the wage rates.

There are certain factors on which wage rates depends that is demand and supply
of workers, if the labour is in short supply the workers will be paid well. Wages will be
low if availability of labour is in plenty. Bargaining power of the trade union, labour union,
or workers and employers also affect the wage rates. As where trade unions or labour
union are strong they force to pay higher wages in comparison to other where union are
week. Cost of living is another big factor which affect the wage rates. Progressive
employers do not leave the wages to be determined by the forces of demand and supply.

9
To ensure a decent living wage to the workers they take due notice of the cost of living for
the worker at that place and try to fix the wages. The comparative wages will increase the
job satisfaction among the workers. Wage levels also influenced by the wages paid by
other firms in the same market for similar work. Wage rates must be consistent with the
wages paid by other firms in the same industry. Ability of industry or firms to pay its
workers also affects the wage rates. Firms earning high profit may naturally afford much
better facilities, better working conditions and wage rates to its workers in comparison to
those firms which are earning only marginal profit. Productivity of labour is considered to
be the significant base of wage determination. Higher wages are paid in firms where
productivity of labour is high as compared to other jobs which do not require the same
degree of risk, skill, capability and responsibility. Degree of competition prevailing in the
market for the product of the industry will also influence the wage levels. If there is a
perfectly competitive market the wage levels may be at equal with the value of net addition
made by the moves to the total output. But in any gives occupation or industry wages may
not reach this level if imperfect competition exists in the product market. The government
has to interfere in regulating wage rates to guarantee minimum wage rates in order to cover
the essentials of decent living since the bargaining power of the worker is not enough to
ensure fair wage in all industries in the country. In order to maintain goodwill of the
company and also to attract qualified employees , a few employers want to establish
themselves as good employers in the society and fix higher wages and better working
condition for their workers.

Discrimination in Indian labour market

Discrimination means treating someone less favourably because of their possession

of an attribute e.g. sex, age, race, religion, family status, national origin, military status,
sexual orientation, disability and body size or shape compared with someone without that
attribute in same circumstance. In labour market discrimination can be classified into two
types that is Wage discrimination and Occupational discrimination. ILO and World Bank
are such multilateral bodies which studied about discrimination across social lines
internationally .These types of disparities are seen as unfortunate by neo-liberals. The
unavoidable side effects of globalization is streamlining of production structure in the
simultaneous facts that workers which were hitherto protected by trade barriers as those
10
getting social security will be excluded from such benefits .The earnings differentials is a
form of inequality generated by the economic system itself and is termed as social only to
hide its economic origin.15

Wage discrimination is quite a wide, comprehensive and universal phenomenon. It

is usually found in all countries in all sectors and in all section of society. There are many
laws, plans and policies for it but still in many countries it has been a subject matter of
intense debate and investigation among several academics. Different studies have tried on
measures the extent of discrimination and finding out appropriate index for it.16 The
commonly explored reasons being labour market segmentation and associated demand and
supply factors. While gender based discrimination has been the focus of other studies.17
They show that discrimination tends to lower equilibrium wages for female because of
many factors like psychological, sociological and religious.

The wage and earning differentials in labour market are associated with deprivation
or impoverishment in a interactional and multidimensional fashion, instead of being a
linear association. Exclusion of poor from participation in society is quite likely, a
common phenomenon. Discrimination leads to deprivation which in turn leads poor people
to be excluded from livelihood and capital formation because of commercialization,
technological progress and obsoleteness of traditional jobs etc. Discrimination in labour
markets may operate along a number of dimensions – gender, religion, caste and age –
which effectively reduces the opportunity for such groups to gain access to social services
and limits their participation in the labour market in India. On the basis of caste lines, the
scheduled Caste and Tribes have been a pariah in the development process of India for
quite a long time. After independence affirmative action‟s in the form of reservation in
education and employment were taken to provide them space in the mainstream and trigger
self- sustaining growth of these groups.

Now a day‟s wage and earning differentials have become a major issue of
developed and developing nations of the world. Disparities exist due to earning
differentials like in assets, consumption, healthcare, educational attainment, and other
accepted indicators of well-being. The disparity and inequality further leaves a bad impact
on human capital formation. As a result, interventions to reduce wages differentials across

11
various sections of the society become a major policy objective for developing countries
like India. In order to eradicate inequality careful steps have to be taken to explore the
levels, trends, and probable cause of wage differentials in the country.

Wage differentials would certainly exist across different occupation because of the
differing levels of skill endowment required for such jobs .However, apart from such
hierarchical structure, evidences of spatial or inter-personal wage differences are also quite
substantial in India. Due to endowment gaps, pure discrimination in terms of lower wage
rate paid to certain groups are also common. The meaningful policy options are being
explored to overcome these issues.

After liberalisation in India there have been initiated new dynamics in the labour
market. On one hand, it is expected that with increased investment, trade and output, more
and better employment opportunities would emerge with increased labour mobility which
leads to narrowing down of horizontal wage differences among workers with similar skills
and in same type of jobs. On the other hand, vertical wage differences are expected to rise
as demand for new skills and occupation increases. In the economy the overall impact
would be on how broad-based the labour market is and that the movements across skill
barriers is relatively easy, depending upon whether institutions for re-training and re-
deployment are in place. It has, however, been generally argued that liberalisation in India
has led to deterioration of the position of the workers in the labour market both in terms of
job availability and wages offered. The flexibility in the market in India, as in other
developing countries in the form of informalization of work goes hand in hand with the
process of neo-liberal reforms.18

The analysis of wages rate determination for Industrial labour in India is mainly
based on aggregate date at all-India level.19 One of the agenda in India‟s National
Development Programme is to ensure equitable distribution of income in different state
within the country which is further important for analysing the inter-state variation of wage
rate for Industrial labour .The movement of wage rate for industrial labour is also one of
the important determinants of distribution of income.

Thus, the industrial performance of different states reveals that the growth rate of
industrial output and employment vary among different states. One of the reasons for such

12
variations may be in turn the variations in the increase in wages for industrial labour across
different states.

The percentage of women in total population is almost 50 percent, but their growth
rate has decreased as shown by sex ratio in different census years. The only improvement
in sex ratio was in 2001. This declining growth rates of females from 24.0 percent to 22.9
percent for 1971 to 2001 time span is due to higher mortality rate and particularly under 5
years of age. The others reasons include neglect of medical care, mal-nutrition, preferential
treatments to boys at the expense of girls, sex selective birth of children etc. According to
1991 census, 20-25 million girls and women were missing and in 2001 the figures were 35
million girls/women were not found.20 Despite their contribution to society and family
women still are discriminated in almost every sphere of life. The issue is more grave
among rural women and other vulnerable groups. Factors that contribute in low
participation rate of women include high incidence of illiteracy and unemployment among
women, socio-cultural norms persisting in the society etc. Education is one of the biggest
factors for increasing productive earnings, efficiency, skill as well as increasing overall
quality of labour. Many others also found that education influences earnings of
individual.21 There are more women workers as well as child workers in unorganized
sector and further the rate of exploitation of these workers is also very high .The
exploitation of women in unorganized sector with reference to male dominance. The
women workers were dependent and subservient, which force them to live under miserable
social and economic conditions .Poverty and other economic difficulties forced them to
take up menial jobs where education is not essential e.g. Maximum women were employed
in Bidi industry, cotton textile, domestic servants and weaving.22 The women and children
in unorganized sector. They aim at examining what is work and what is unorganized? Why
are certain workers excluded in the census measurement and certain others not. What is
employment structure in this sector? What kind of projects and programmes will help
working women in informal sector to move towards a self reliant spirit and increase their
confidence? How are working women in the informal sector to be formulated? They
classify the working women into three categories on socio economic basis:

a) The first category mostly comprises of women who work in offices or are
professionals. They can be termed as blue collar women workers.
13
b) The second category includes those women who are educated and enjoy economic
security but their number is small. In this category women work for improving their
living standard and for self actualization.

c) The Third category constitutes those agricultural women workers who are engaged
in traditional menial services. This group is very poor and largest. Their
counterparts in urban areas are migrant workers, self employed women,
construction labour and domestic servants in the informal sector. Further author
wind up that in the informal sector women face many problems – long hours of
work, low wages, sexual harassment and insecurity regarding job mostly women
work for economic reasons. In some cases, jobs are taken up for leading a life of
independence of self actualization or of escaping boredom. In few cases women
take up jobs to support their families. Some unmarried women have to take up jobs
to make money for their dowry.23

In Indian economy women workers play a vital role for development of

unorganized sector. As in India the term „unorganised‟ is often used to the vast number of
men as well as women engaged in different forms of employment. These forms may
include self employment (for example selling of vegetables and fruits), labour and
construction site workers , domestic work , employment in house hold enterprises , other
forms of causal or temporary employment and home based work (for example rolling
beedis and papads). Actually, the unorganized sector is physically more distinguishable in
India. Almost it is found in all industrial units of the Indian economy that is industry, the
service sector and agriculture. Still it has its existence in India for a long time but it is only
in the 1970s that it receive the attention of planners, policy –makers and researchers for
participation in it and reaping the benefits of developments .As in India formal sector
failed to absorb and to provide employment to the growing labour force , due to which
there is labour force explosion. Under these circumstances the surplus labour force has
been forced to generate its own means of income and employment. This new class of petty
-bourgeois is engaged in a variety of economic activities. In all major aspects of
employment, job- security, earnings, perquisites, social security and retirement benefits.
The unorganized labour is found to be in a disadvantageous position.24

14
 Globally it is found that inequality of earnings is a growing phenomenon. Many
researchers believe that there is a large increase in the demand for skilled workers relative
to that for less skilled individuals due to skill-based technological change. Automation,
computerization and other technological advances leads to inequality for earnings i.e.
skilled workers are in demand than unskilled ones. In 20, September 2004 the Constitution
of the National Commission for Enterprises in the unorganized sector , was one of the first
step taken up by UPA Government, in pursuance of its common Minimum Programme that
committed itself “to ensure the welfare and well being of all workers , particularly those in
the unorganized sector who constitute 93 percent of our work force”. Although the Indian
economy experienced a reasonably high growth rate till then, this was not seen as inclusive
enough, by the majority of the population. The policies pursued by the new government
made “Inclusive Growth” as its central plank.25

However, wage differentials arising out of technological change is different from

that due to globalization. The growing traded sector of an economy attracts capital as well
as human resources from the non-traded sector. Further some workers may lose jobs from
globalization. This is most evident in the case of workers displaced from sectors that
contact labour in the face of import competition as well as outsourcing. The latter from the
North to the South has become symptomatic of globalization and job as well as wage loss.

In agricultural development and allied fields, women play a significant and crucial
role which includes main crop production, livestock production, horticulture, post harvest
operations, agro social forestry, fisheries etc. In spite of playing such a significant role they
are still considered as invisible workers. Further women play a crucial role in the socio-
economic development of a country. But both in the industrially developed and less
developed countries, women are burdened with cumulative inequalities as a result of
discriminatory behaviour towards them.

The condition of rural women in India is much worse. Low paid jobs and even
lower earnings shows the real picture of their worse condition. The underlying rationale
behind this is supposition that women are materially dependent on men, and therefore the
issue of equal earnings seems an aberration. Skill, in agricultural women in general, take
up only specific job which the male workers usually avoid. In agricultural labour force

15
there is tendency for job-segregation. There are several consequences of such job-
segregation that is inequality in wage rate between the males and females, the reservation
of high prestige and high wage jobs for men and low prestige and low-wage jobs for
women workers. Also it reduces negotiating power of women workers and reduces them to
the state of marginal, intermittent oppressive labour. So in agricultural labour market the
agricultural women constitute the most exploited segment of labourers and their
employment level and wage rate remain significantly below those of men. In spite of the
fact that the women have proved their fortitude in every walk of life, their contribution is
not given due credit in most cases. In India women constitute nearly half of the total
population and they play a vital role in domestic sphere in the rural fields and also in urban
economy. Yet their economic status is still low as it reflect from census data, particularly
of those who are engaged in the informal sector of urban economy.26 In our society or
country women are much more dependent on men for all their needs. For this reason
women in our society have so far had only a secondary status and the economic
dependence of women upon men is more of the primary reasons which has pushed them
into the background and resulted into their secondary status both within and outside the
family.27 There is significant contribution of women workers in national development of
the country by performing in unremunerated/unpaid work and remunerated/paid. In order
to look after their families they also struggle. Women workers have to face double burden
as there is greater demand inside home doing the same work which is unpaid and outside
home where there is more demand for their skills as care-givers and service workers.
According to an ILO estimates, the value of unpaid household work constitute 25 to 39
percent of GNP. Women s contribution to the economy by and large remain unrecognized.
Yet their services are valuable. The World Bank in its Annual Report in 1989 observed
that 35 percent of Indian households below the poverty line are headed by women, and in
most cases are thus, dependent exclusively one income.28

In modern India, the evolution of female labour force participation has differed by
states. In 1991 the female labour participation in India was lower than in 1901-1951, when
the participation rate ranged between 28 and 34 percent respectively. If we compare upper
class, middle class and poorer household women and give a look on their participation
rates only the upper class women are invoked to participate in the labour force (especially

16
in the cities) whereas, middle class women do not tend to participate in the labour force,
while women from poorer household cannot afford to engage in productive activities
outside the home. This indicates the existence of a U-shaped relationship between female
labour participation and development.29 The argument is that the initial decline in female
participation is due to an income effect-due to the change from home production to manual
work market production, against which a social stigma exists. With the development of
economies, women enter the labour force through better jobs (white-collar work) against
which no social stigma exists. Thus, in India female labour force participation is due to the
interaction between social norms and economic conditions.30

Informal or Unorganised Industry

One of the main official sources for labour statistics in India is the Directorate
General of Employment and Training, Ministry of Labour which makes a distinction
between organized and unorganized sectors based on the size of employment. The
organized sector comprises of public and private components. Employment in the public
sector consists of government civilian employees and employees in public enterprises.
Public sector enterprises take three forms: the so-called departmental undertakings, public
companies and public corporations. Departmental undertakings are an integral part of
government, with the same status as the government departments. Public companies are
incorporated under the Companies Act of 1956 and have the same status as private
companies. Some of them are wholly owned by the government, while in others the
government has a controlling interest. Public corporations are individually created by
specific legislation as separate legal entities with defined powers, management structure
and duties

In India as well as other developing countries of the world, their major parts of
work force are part of unorganised sector. Although the importance of this sector is
multifarious for different countries, societies and in different periods of time but it
becoming more and more important to study it. As per World Bank report the informal
economy refers to activities and income that are partially or fully outside government
regulation, taxation and observation. The main attraction of the undeclared economy is
finance. This type of activity allows employers paid employees and self employed to

17
increase their take home earnings or reduced their costs by evading taxation and social
contribution. The term „Informal Economy‟ refers to all economic activities by workers
and economic units that are in law or practice not covered or insufficiently covered by
formal arrangements of protection. Their activities are not included in the law, which
means that they are operating outside the formal reach of law, or they are not covered in
practice which means that although they are operating, within the formal reach of the law,
the law is not applied or not enforced or the law discourages compliance because it in
appropriate burdensome imposes excessive costs.31

Keith Hart was the first one to introduce the „Informal Sector‟. Soon after this in
September 1971, International Labour organization (ILO) Employment Mission to Kenya
came with its report „Employment Income and Equality‟.32 Hart consider the informal
sector as almost synonymous for the categories of small employed.33 After this it was
typically used to refer to ways of making a living outside the formal wage economy, either
as an alternative to it or as a means of supplementing income earned with it.34

Further Hart distinguish formal and informal incomes opportunities on the basis of
whether the activity entailed wage or self employment, pointing that wage earning
employment is a characteristic of the formal sector only. Therefore, the concept of
informal sector used by Hart was limited the small self – employment individual workers.
Inspite of some limitations in his concept of informal sector, the introduction of this
concept made it possible to incorporate activities that were precedently ignored in
theoretical models of development and in national economic accounts.35

In the academic literature the term „informal sector‟ came in a broader sense only
after the visit of an International Labour Organisation (ILO) employment mission to Kenya
in 1972. The ILO than provided guidelines for the collection of statistics on informal sector
as well as enlarged its conceptual framework and presented the same in the Fifteen
International Conference of Labour Statisticians (ICLS) held in February, 1993 in the form
of resolution. The resolution was then affirmed by the United Nations Commission
(UNSC) and made a part of the System of National Economic36 (SNA) by United Nations
Economic and Social Council.

18
 Though the term „informal Sector‟ gained currency after ILO evolved a conceptual
framework and guidelines for the collection of statistics on informal sector, there has not
been any single definition of informal/unorganized sector in India. Informal sector
remained a matter of discussion among the academicians, policy makers etc. from the
beginning, as a large chunk of workforce is employed in this sector. Different criteria were
being used to identify the informal sector but none of them was universally applicable in
different empirical situations.37 The fourth Economic Census of India took the criteria of
own account enterprises and employment establishments employing one to nine workers to
identify the informal sector. The different organizations of India like National Sample
survey Organization (NSSO), Directorate General of Employment and Training (DGET)
etc. used varying definition of informal/unorganized sector depending on the specific
requirements of each organization keeping in view the absence of a uniform definition of
informal/unorganized sector in India, the National Commission for Enterprises in the
Unorganized definitions of informal/unorganized sector employment and informal
/unorganized employment.38

In India labour force is divided into organised sector and Unorganised sector.
Maximum number of labourers are employed in the unorganised sector. The organized
sector comprises enterprises for which the statistics are available from budget documents
or reports while unorganised sector refers to those enterprises whose activities or collection
of data is not regulated under any legal provision. The term unorganized, informal
traditional household and unregulated are used interchangeably. Sinclair analysed that the
definition of informal sector indicates broad spectrum of heterogenous activities of urban
poor household, starting from employment in small scale industries (SSIs) to self
employment, skilled and unskilled including street vendors and petty traders with low and
irregular incomes. Unorganised sector often refers to the activities typically at a low level
of organization and technology with the primary objectives of generating employment and
incomes.39 The activities are usually conducted without proper recognition for authorities
and escape the attention of the administrative machinery responsible for enforcing laws
and regulations.40

In 1999-2000 as per the National Sample Survey Organisation (NSSO) a branch of

MOSPI (Ministry of Statistics and Programme Implementation) analysed that total work
19
force as on 01.01.2000 was of the order of 406 million, about 93 percent of total work
force was employed in the unorganised sector while remaining 7 percent are engaged in
organised sector.

The NSS 55th round, 1999-2000 also covered non-agricultural enterprises in the
unorganised sector in India. As per that survey, there were 44.35 million enterprises and
79.71 million workers employed in non-agricultural Unorganised sector of the economy.
Among these 25.01 million enterprises employing 39.74 million workers were in rural
areas whereas 19.34 million enterprises with 39.97 million workers in urban area. Among
the workers engaged in the unorganised sector, 70.21 million are full time and 9.5 million
part times. Percentage of female workers to that of total workers is 20.2 percent.41

The NSSO data describes the major employment trends for organized and
unorganized sector for the year 1983-84 , 1987-88 ,1993-94, 1999-00 shows that a large
chunk of the work force in India is found to be employed in the unorganized sector .The
remarkable steadiness over the years has been due to the increased share of unorganised
employment . The share of unorganized employment has risen from 92 percent (nearly 276
million out of 300 million) in 1983 to 93 percent in the 1999-00.It is seen that employment
opportunity in the organized sector has remained more or less stagnant , showing only a
marginal increase from 24 million in 1983 to 28 million in 1999-00.42 Thus unorganised
sector is important in terms of providing employment opportunity to a large segment of the
working force in the country and contributes to the national domestic product, savings and
capital formation.

20
Table 1.1 Sector-wise distribution of workers by Area and Sex (2004-2005)

Area Sex Formal Sector Informal Sector Total

Rural Male 21.17 197.87 219.04

Female 6.82 117.21 124.03

Persons 27.99 315.08 343.07

Urban Male 28.46 61.94 90.40

Female 6.12 17.88 24.60

Persons 34.58 79.82 114.40

Total Male 49.63 259.81 309.44

Female 13.94 1.35.09 148.03

Persons 62.57 394.90 457.46

Source: NCEUS 2008, Task Force Report Government of India

In the table 1.1 shows the sector-wise distribution of workers by areas (Rural and
Urban and Sex). In 2004.05 the total employment was 457.46 million for both the sectors
that is formal to informal. In informal sector there were 394.90 million workers employed
out of them 315.08 million were in rural areas and in urban areas they were about 79.82
million. There were 62.57 million workers employed in formal sector, 27.99 million were
in rural and 34.58 million were in urban areas respectively.

For the rural areas, there were 197.87 million and 21.17 million male workers in
informal and formal sectors respectively. The female workers were 117.2, million and 6.82
million informal and formal sector respectively while in the urban areas, there were 61.94
million and 28.46 million male workers in informal and formal sectors respectively.
Further there were 17.88 million female workers working in informal sector and 6.12
million found working for formal sector.

21
Table 1.2: Distribution of workers in sectors (Organised and Unorganised by type
of Employment for 1999-00 and 2004-05

Sector 1999-2000 2004-2005

Formal Informal Total Formal Informal Total

Organised 33.67 20.46 54.12 33.42 29.14 62.57

Sector (62.20) (37.80) (100.00) (53.42) (46.58) (100.00)

Unorganised 1.36 341.28 342.64 1.43 393.47 394.90

Sector (0.40) (99.60) (100.00) (0.36) (99.64) (100.00)

Total 35.02 361.74 396.76 34.85 422.61 457.46

(8.83) (91.7) (100.00) (7.46) (92.61) (100.00)

Source: NECEUS (2008) Task Force Report Government of India (GOI)

Note: Figures in Brackets indicates percentages

Table 1.2 shows the distribution of workers in sectors (Organised and Unorganised
Sectors) by the type of employment for the years 1999-00 and 2004-05. During 1999-00
there was about 37.80 of the employee in the organized sector were Informal workers and
it increased up to 46.6 percent in 2004-05 .In 1999-00 there was about 0.4 formal
employment in the Informal sector and it also increased to 0.36 percent in 2004-05 .In case
of total work force, 91.7 percent were Informal work force in 1999-00 and it increased to
92.61 percent in 2004-2005. Further Total work force, 8.83 percent were for formal
workers in 1999-00 and it decreased to 7.46 percent in 2004-05.

22
Table 1.3: States with the highest percentage of workforce in the informal sector
2004-2005

S. No. States Percentage Share of Total Informal

Workers Workers

Male Female Persons

1. Bihar 95.63 98.43 96.19

2. Uttar Pradesh 9.67 97.9 92.47

3. Rajasthan 88.33 95.55 91.10

4. Odisha 88.15 93.55 91.18

5. Chhattisgarh 85.49 95.60 90.08

6. Madhya Pradesh 87.27 92.66 89.71

7. Andhra Pradesh 85.33 94.4 87.06

8. Jharkhand 84.44 96.60 88.28

9. Uttaranchal 81.21 94.04 87.61

10. Karnataka 84.61 90.05 86.59

All States 85.96 91.06 86.32

Source: NCEUS 2008, Task Force Report Government of India

The table 1.3 highlights the ten states with highest percentages of workforce to its
total workforce in the informal sector in 2004-05. The state of Bihar had been at number
one position with highest share 96.19 percent informal sector workers out of total
workforce. It was followed by Uttar Pradesh (92.47 percent), Rajasthan (91.16 percent),
Odisha (90.08 percent), Chhattisgarh (89.71 percent), Madhya Pradesh (89.06 percent),

23
Andhra Pradesh (88.28 percent), Jharkhand (87.61percent), Uttaranchal (87.38 percent)
and Karnataka (86.58 percent).

In Indian economy manufacturing is one of the most important and significant

sector of the industry. During 2006-07 the manufacturing sector had share of about 16
percent in the GDP at the factor cost as per the National Accounts Statistics. Broadly
manufacturing sector has been sub divided into two categories that is Organised and
Unorganised manufacturing. For organized manufacturing sector data is collected through
Annual survey of Industries (ASI) and the same for unorganized manufacturing sector are
collected periodically through sample survey as follow up survey of Economic Census
(EC). The total contribution by unorganized manufacturing sector in the total GDP has
roughly about one – third of total share.43 Thus in India manufacturing sector is one of the
most important and contributing to economy as whole

Objectives of the Study

The present study has the following objectives:-

1. To explore the structure of Indian Labour Market.

2. To investigate the Education wise Rural-Urban wage differential among

manufacturing workers.

3. To assess the wage differentials for manufacturing workers-both the rural-urban

areas for regular - casual employees and the differentials in casual–regular
employees in the two sectors.

4. To find out the extent of wage discrimination between male and female workers in
manufacturing industry and the factors responsible for such income differences.

5. To analyse the interstate variation in the growth and determination of the wage rate
for industrial labour.

Hypotheses

This thesis will seek to test the following hypotheses:

1) There is a wage differential both in rural and urban areas.

2) Wage differential has narrowed due to increase in women education.

24
3) Inter-state wage variation is high and the relative position of the states with respect
to wages has not undergone any major changes over the period.

Chapterization

Chapter 1 : Introduction

Chapter 2 : Review of Related Literature

Chapter 3 : Structure of Indian Labour Market

Chapter 4 : Trends in wage and Income changes

Chapter 5 : Wage Inequality on the Basis of Education and Gender

Chapter 6 : Inter- State comparisons.

Chapter 7 : Conclusion

: Bibliography

Methodology

The present study is descriptive, exploratory as well as empirical in nature. As

present study is a secondary data based study where the data will be collected from the
published and unpublished reports, Books, Journals documents available in different
libraries of the various departments, institutions and offices. NSSO reports would be
thoroughly scanned and relevant data would be structured. The CSO reports and data
available from other agencies will also be consulted. The empirical data thus collected will
be analysed and interpreted through tabulation with the help of statistical method of
research.

In order to measure the wage discrimination the methodology will also include

 State-wise analysis

 Sector-wise analysis

 Sex-wise analysis

25
 As this is secondary data based study, NSSO (National Sample Survey
Organization) Surveys is the main data source of the study which provides extensive data
on unorganised manufacturing sector. In addition to it secondary data has been collected
from various official websites that is http://mospi.nic.in/Mospi_New/site/home.aspx ,
Official website of the Ministry of Labour and Employment, Official Labour statistics

So, far NSSO has conducted six follow up surveys of Economic Census (EC)
through rounds 33rd (1978-79), 40th (1984-85), 45th (1989-90), 51stt 1994-95), 56th (2000-
01,) and 62nd (2005-06) with unorganized manufacturing as the main subject of enquiry.
Out of the following different rounds, Round 51st (1994-95) and round 56th (2000-01) and
round 62nd (2005-06) has been taken by researcher for this study. It was embarked for
survey on Unorganised manufacturing enterprises under the two digits code 15-37 (Section
„D‟) of NIC (2004) and enterprises under cotton ginning, cleaning and bailing (NIC2004,
code 0145). NSSO cover about 23 Sub sectors as per National Industrial Classification
(NIC). The National Industrial Classification (NIC) 1987 has been used for classifying the
industry to which a person is attached since the 44th Round. Prior to NIC 1987, NIC 1970
was being used. From 55th Round onwards NIC 1998 is being used. There are total 17
Section in NIC 1998. Each section consists of Division which are 60 in total number.
Further each division may be Division into 9 Groups and they are total of 159 Groups.
These groups are Sub divided into 292 classes. Ultimately category at the 5 digit level is
termed as Sub Class which is engrossed mainly to meet the national requirement and to
accommodate appropriate 4 digit categories of NIC 1987. There are 1021 such Sub Classes
and at one digit level classification (Tabulation category) of NIC 1998 Manufacturing has
code „D‟.

The data is disaggregated into various states and rural-urban segments and in male
and female classification. Further the study will take into account sixteen states to analyse
the interstate comparisons for wage discrimination in India labour market. The data which
is rendered by NSSO is divided into enterprises and establishments namely, Own Account
Manufacturing Enterprises (OAMEs), Non-directory Manufacturing Establishments
(NDMEs), Directory Manufacturing Establishments (DMEs). Futher, NSSO has classified
enterprises and establishment as follows :-

26
Enterprises

An Enterprise is that which is engaged in the production and distribution of goods

and services meant mainly for the purpose of sale whether fully or partly. An enterprise
may be owned and operated by single or by several households jointly on a partnership
basis or by an institutional body.

OAMEs (Own account manufacturing enterprises): A enterprise engaged in

manufacturing or repairing activities, which is run without any hired workers, employed on
a fairly regular basis is known as own account manufacturing enterprises.

Establishment

An establishment employs at least one hired worker on a fairly regular basis. (Paid
or Unpaid apprentices, Paid household ember/servant/resident workers in an enterprise are
considered hired workers). Establishment are further divided into two types.

a) Non-directory manufacturing Establishment (NDMEs)

b) Directory manufacturing Establishment (DMEs)

NDMEs (Non directory manufacturing establishment): An establishment which

employs less than six workers (Household and Hired workers taken together) is known as
Non-directory establishment.

DMEs (Directory Manufacturing Establishment): An establishment which has

employed six or more workers (household and hired workers taken together) of such
establishment engaged in manufacturing in repairing activities it is known as Directory
manufacturing establishment, but not registered under the Factory Act 1948 (NSSO, 2002).

Analysis of Data

The data for present study has been taken from different rounds of NSSO that is
Round 51st (1994-95), Round 56th (2000-01) and Round 62nd (2005-06) and mutually
explosive category. In order to exhibit comparison and to highlight the involved relation
data has been tabulated in a compact form. The data has been presented and analysed with
the help of statistical tool , growth rates and percentage shares . Further One -way (Anova)

27
has been applied to see the wage discrimination between the industries of rural and urban
areas as well as between the different states of India in unorganized manufacturing sector.

For analysis the data, simple averages, annual growth rates and correlation
coefficients have been used.

Testing of Hypotheses

For the testing of hypotheses the statistical tool one way analysis of variance (One -
Way ANOVA) is applied. Further, the one way analysis of variance (ANOVA) is used to
determine whether there is any significant wage differentials between rural and urban areas
and between the different states.

28
End Notes

1. A.K Sharma (2006), “Labour Economics”, Anmol Publication Pvt Ltd New Delhi,
p.56.

2. Encyclopaedia Britanica, Vol.23, p.267.

3. N.S. Gupta (1985), “Dynamics of Modern Management”, pp.155-156.

4. Wage structure in theory and practice (1996), p.43.

5. Report on the work of the Payment of Wages Act, 1936 (2012), pp.177-181.

6. A.K Sharma (2006), “Labour Economics”, p.63.

7. A.K Sharma (2006), “Labour Economics” ,p.64

8. Ibid, p.64.

9. Ibid, p.65.

10. A.K Sharma (2006), Op. Cit, p.69.

11. Report on Working of Minimum Wages Act 1948 (2006), p.27.

12. Ibid, p.29.

13. Sanjay Upadhyaya, (2012),” Evolution of Minimum Wage Policy and Regulatory
Framework: An Inter Country Perspective”, V.V. Giri National Labour Institute,
pp.12-14.

14. Minimum Wage Act 1948, Government of India.

15. M. Willis (2000), “Meddling with the Media,” p.54.

16. S.C Aggarwal, (2007), “Wage Discrimination in Indian Manufacturing: A State

Level Analysis” p.991.

17. Ibid, p.991.

18. Unni, and Rani U, (2008): Flexibility of Labour in Globalising India: The
Challenge of Skills and Technology”, pp.7, 1-54.

19. Arpita Ghose and Satarupa Roy, (2007), “Inter-State Disparty in the growth and
determinants of wage rate for Industrial Labour in India”, p974.

29
20. Census of India -2001 (2006) “Population Projections for India and States 2001-
2026.”

21. Sailabala Debi (2007),”Education Gender and Income Difference ” , p.999

22. K.M. Manohar, (1983), (eds), “Socio – Economic Status of Indian Women” Sage
publication.

23. Gangrade, K.D. and Gathia, J. A, (1983), Women and Child workers in un
organized sector , Non Government organization perspectives, Concept publishing
company, New Delhi, P.104

24. S.K.G Sundaram, (2000), “Organising working for the unorganised labour- the
case of Mumbai”.

25. Arjun, Gupta Sen, ( 2007), “Report on conditions of work and promotion of
livelihood in the unorganized sector India”

26. S.N Tripathy and S. Das, (1991), “Informal Women Labourer in India.”

27. K. Wadhera, (1976), “The new Bread Winner”.

28. Balbir Soni,(2001 ), “Reforms Prospectus for Rural development”

29. Claudia Goldin, (1994), “The U-shaped Female Labour Force Function in
Economic Development and Economic History.”

30. M. Roy, (1997), "Wage Determination in the Public Sector: The Indian Case,"

31. ILO, (1972), “Employment, Income and Equality: A Strategy for Increasing
Productive Employment in Kenya, ”

32. ILO, (1973), “ILO report of the fifteenth International Conference of Labour
Statisticians , Geneva”

33. Gerxhani Klarita, (2004), “Informal Sector in Developed and Less Developed
Countries: A Literature Survey”.

34. R. Bromley and C. Gerry (eds.), (1979), „‟Casual Work and Poverty in Third World
Chichester, Wiley and Sons”.

30
35. M. Swaminathan, (1991), “Understanding the Informal Sector: A survey”, WIDER
Working Paper No. 95, Finland.

36. SNA, (1993), System of National Accounts Commission of the European

Communities, International Monetary Fund, Organisation for Economic
Cooperation and Development, United Nation

37. T.S. Papola, (1981), “Urban Informal Sector in a Developing Economy.”

38. Anup Mitra, (2001), “Employment in the Informal Sector”,

39. S.W. Sinclair, (1979), “Urbanisation and Labour market in Developing Countries”

40. ILO, (1991), The Dilemma of the Informal Sector, Report of the Director- General(
Part 1), ILO Geneva.

41. Tholkappian. C, (2014), Organised and Unorganised Sector Employment in India:

Macro Stand Point, p.295

42. Indian Labour Market in Transition: Setting the Tone for Employability ATLMRI
Discussion paper (2007), pp.36-37

31