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Essay on Wage Inequality
Essay Contents:
- Essay on the Wages of Men and Women
- Essay on Equal Pay for Equal Work
- Essay on Heterogeneous Wage Rates and Standardisation of Wages
- Essay on the Principles of Wage Differentials
- Essay on the Wage Differentials and Standardisation of Wages
- Essay on the Criteria for Wage Determination
Essay # 1. Wages of Men and Women:
It is found that many jobs are done exclusively or almost exclusively by men, others by women, and there are also occupations in which men and women are employed together on the same kind of work.
Thus, dock labour, underground minings, iron and steel work, shipping and locomotive driving, are example of jobs which because of heavy physical toil and arduous conditions, are mostly done by men. Some textile jobs are done by women, some by men and some have a mixed labour, e.g., the bulk of women workers have been engaged in agriculture and allied activities along with men.
Reasons for Low Wages for Women:
There is always a tendency found that women workers are paid low wages as compared to men. It is sometimes argued that because women are not suitable for employment in the heavy industries, the supply of women available for the lighter industries is increased relatively to that of men and this is a cause of lower wage.
It has been also argued that women are by nature, not so efficient to do physical work as men can do. They cannot work for long hours. Also, wages in lighter industries in which both men and women are employed are determined by the relation between the demand for and the supply of labour. The supply of labour force consists of men and women, and their wages depend on their efficiency.
The average wages rates and earnings of women are substantially below those of men. There are many reasons for the differences, an important on being that proportion of men who undergo long apprenticeship or other training to become skilled artisans and technicians or to gain professional qualifications is much greater than that of women.
This is mainly because most girls expect to marry after a few years, and are unwilling to take a lengthy training for skilled work or professional carrier but prefer to do unskilled or semiskilled jobs which can be quickly learned. The average wages of men are higher because the proportion of skill is greater in men than among women.
A much larger production of men have dependents to maintain, and they therefore tend to work harder than women and girls to ensure good earnings from piece work, and they are keener in work overtime. Absentee rates, especially from sickness, are somewhat higher among women. Turnover is greater among women, and these results in additional costs.
When abnormal conditions arise or when rapid changes in methods are necessary, women are often less flexible and adaptable than men. Also although on some jobs there may be little difference in the efficiency of men and women while the work is going on normally men are often more able to deal with emergencies and other unexpected breaks in routine.
Where, for any of the reasons given, the output of women is lower than that of men, they cost more in capital overheads, administration, and supervision, and, therefore, even when piece rates are paid, lower rates may be fixed for women to allow for these higher overhead cost.
In some profession men and women are paid equal rate, whether they are in established employment or receive fees from clients, but usually the men greatly outnumber the women, e.g., as doctors and lawyers. Also, although payments are at the same rates, a man’s earning are higher and promotions more rapid, except for a few outstanding able women.
Not only in the profession, but in industry, the civil service, and other occupation, application of the principle of equal pay for equal work to men and women alike is economically sound and an expression of elementary social justice, But over a wide field of employment employers believe from their experience that men are more efficient, more resourceful, and more productive, whether because of their greater strength, adaptability, wider experience, or their greater needs for dependents.
If any such occupations equal rates were fixed for men and women, employers would prefer to employ men, and the employment of women would decline. Especially efficient women and would continue to be employed, but there would be danger that some women whose output was not equal to that of men might strain themselves in trying to keep their jobs.
Essay # 2. Equal Pay for Equal Work:
Equal pay for equal work both men and women is one of the Directive Principles of the Indian Constitution. The I.L.O. has also adopted a convention on this subject. Besides, the Fair Wages Committee and other wage fixing authorities have, from time to time, recommended the same wages for men and women workers. The Equal Remuneration Act, 1976, has also been enforced in all the Textile Industries. The act provides equal remuneration to men and women workers for similar type of work. Hence, it is the principle of State Labour Policy in India.
Difficulties to Implementation of the Principle:
The principle “equal pay for equal work” together with its converse “unequal pay for unequal work” is part of the problem of relative wages. They can be stated in a more generalised form, that payment should be proportionate to work done.
Equal pay for equal work seems to be fair that it might be expected to command general agreement and universal application, but there are many difficulties to put it into practice.
For instance, a number of workpeople may be doing identical work in the sense that conditions of the job, the tools, and the material used and the product are the same for all. In other words, the conditions, processes and product are standardised.
But here the difficulty may arise in applying the principle of equal pay for equal work because the workpeople cannot be standardised and there may be considerable difference in their experience and efficiency, and, therefore, in the amount and quality of their output may differ. Hence, the wages of workpeople may differ.
In this context, the Committee on Fair Wages (1948) made it clear that, the earnings of men and women may differ on account of difference in efficiency, while implementing the principle of equal pay for equal work. To put in the words of the committee, “where employment is in piece rate or where the work done is demonstrable identical, no differentiation should be made between men and women workers regarding the wages payable. Where, however, women are employed on work exclusively done by them or where they are admittedly less efficient than men, the fair wages of women workers should be calculated on the basis of a smaller standard family than in the case of man.”
Here, it has been argued that, when the work is suitable for piece rates and the same piece rate is applied to each worker, then the earnings of each worker will depend on his or her output, and the principle of equal pay for equal work will be roughly operative, with however, inequalities of earnings resulting from the differences in efficiency. Hence, the use of equal piece rates may not entirely satisfy the principle.
If time rates are paid, then the adaptation of the principle implies that a different rate should be fixed for each worker according to his or her efficiency. There are, however, many objections to his method, including risks of favoritism, and errors of judgment in determining the efficiency of each worker, resulting in discontent among the workpeople.
Therefore, the fixing of “the rate of the job” equally for all workpeople is strongly supported. Hence, equal pay for equal work, means equal pay for the same job. It does not mean equal pay for all type of workers.
If work is done in different localities where the cost of living is unequal, the equal pay would involve unequal money wages to yield equal real wages. Besides, wages in depressed industries usually fall below those paid for work requiring similar skill, energy and experience in prosperous industries.
Hence differences in wages at different places in different occupations will always remain, and by standardisation is not meant a uniform wage at all places. It can only mean the application of a uniform standard in fixing the wages on scientific lines and to narrow down wide differentials and yet maintain an incentive towards higher skills and increase in productivity.
On account of these factors, wages in some occupations are low while in others they are high. Besides, differences in wages at different places also occur due to the differences in prices and in cost of living. Standardisation of wages does not mean a uniform standard in fixing the wages on scientific lines. However, the principle under consideration is very useful and of great practical importance as it removes differences in wages on similar kinds of jobs.
The First Five Year Plan rightly pointed out that the differences in wages relate to:
(1) The degree of skilled labour required
(2) The strain and the fatigue involved,
(3) The training and experience required,
(4) The responsibility to be undertaken,
(5) The mental and physical equipment for doing the work,
(6) The disagreeableness of the task, and
(7) The attendant hazards. Hence, all these factors should be taken into account while fixing standard rate of wage for a particular job, consistent with the social objective of equal pay for equal work.
In the context of implementation of Principle of Equal Pay for Equal Work, the All India Women Conference (AIWC) pointed out “poignant cases of different wage rates fixed for men and women for the same type of work.” The Statement of Government and employers and worker organisation corroborates the Statement of the AIWC.
The National Commission on Labour also observed that, “In the larger sectors where the women are employed, viz., agriculture and small scale industries, evidence show that in fixing wage some State Governments have not been free from discrimination against women.”
The National Commission on Labour further observed that, “our concern is all the greater, since those who suffer more, even among women as a group, are ignorant, unskilled and semi-skilled workers coming from communities which convention recognises as belonging to the lower social strata and protecting whom Article 46 of the constitution is presumably intended. In a way, women belonging to these communities are intended to be doubly protected (a) because they are the weaker section, and (b) because of the comparatively unfortunate communities to which they belong; and it is here that the protection is least.”
The National Commission on Labour, however, conceded that, though the wages of women worker have been lower than those of men, the differences have tended to narrow down in recent years mainly for two reasons:
(i) Fixation of statutory minimum wages under the Minimum Wages Act, and
(ii) Standardisation of wages for different jobs through the operation of Industrial Relations Machinery.
Essay # 3. Heterogeneous Wage Rates and Standardisation of Wages:
Wage Differentials and Necessity for standardisation a heterogeneous growth of wage rates in industries has been one of the heritages of the past. This heterogeneity prevailed for the same skills as between different industries as also for similar skills within an industry itself and that too at the same centre.
Even today, wages in India vary from State to State, from industry to industry and occupation to occupation. Thus, the Sixth Five Year Plan said that, “Marked disparity between inter-state and inter-regional, inter-industry occupations and also between the organised and unorganised and urban and rural sectors in all these matter is a noticeable feature.” While there are differences in wages rates within each industry in each state, the regional differences are marked.
Since, these differentials in wage rates are not based on any scientific principles. These wage differentials have led to waste of a lot of time, money and labour. It may also become a source of industrial unrest, migration and instability of labour force as well as varying in labour costs. Hence, standardisation of wages is considered as essential. The standardisation means similar wages for similar classes of work in different industries and regions.
Efforts for Standardisation:
Early attempts at standardisation of wages were made by the Bombay Industrial Disputes Committee in 1922 and again by the Textile Tariff Board in 1927. The latter recommended to the Mill Owners Association the adoption of a system of standard wages for the same class of work as between mill and mill. The Bombay Mill Owners Association thereupon evolved a scheme which has examined in detail by the Bombay Strike Enquiry Committee of 1928-29.
It was satisfied that a large measure of uniformity could be introduced “in certain industries without prejudice to their economic position and at the same time, a higher wage level can be secured to some of the lowest paid classes.” It recommended standardisation of wages in cotton textile and more specially in Jute Mills where almost no standard existed.
Reporting fifteen years after the Royal Commission on Labour while stressing the need for standardisation, the Labour Investigation Committee concluded that no progress had been made in the matter except in the cotton textile industry in Bombay and Ahmedabad. The committee attributed it to “an imperfect appreciation on the part of the employers of the industries concerned not to unsettle labour by bringing in the wage structure.”
The committee itself conducted a wage census and identified the industries in which little or no progress took place in this regard. Among them were jute, matches, silk and wood, where no standardisation either of wages or occupations existed and where wide disparities were found to prevail in the wages obtaining in different units of the same centre. The Committee on Fair Wages showed its strong preference in favour of standardisation.
But even prior to its report, the large section of textile workers in Bombay province and engineering workers in Bengal had go through Industrial Courts/Tribunals secured the benefits of standardisation of wages. In 1950, a committee was also appointed for standardisation of wages in sugar industry.
The First Plan recommended inter alia a clear objective of accelerating the process of standardisation of wage rates and extending this process to as large a field as possible even if industrial tribunal sought to introduce a measure of uniformity in wage fixation.
The setting of Wage Boards beginning from 1957 gave a real fillip to the standardisation of wages in individual industries. But inter-industry standardisation was outside their scope except to the extent the parties to wage settlement wanted to draw upon the experience in other industries. Such inter-industry standardisation as is necessary and desirable can, therefore, come in a group of industries which have attained a certain degree of stability and sophistication.
The Sixth Five Year Plan pointed out that, the impact of certain factors like the capacity to pay, productivity and profitability consumption pattern and cost of living, system of wages fixation criteria considered in respect of wage fixation, etc., also the heterogeneous character of the economy as reflected in different regions would be taken into account while determining wage differentials or disparities. The Plan, however, emphasised that, “the national wage policy should be based on a rational system of wages which inter-alia provides for wage differentials justifiable mostly on economic criteria.”
It means that, the wage differentials should be based on economic criteria. The Plan further pointed out that, the protection afforded under the Minimum Wages Act, 1948 has helped to minimise the exploitation to some extent in the rural/unorganised sectors.
Growth of income and employment in the unorganised sector would, however, go a long way in narrowing down these disparities. Since, low productivity in agricultural/rural unorganised sectors, socio-economic characteristics including the large extent of mass, poverty, unemployment/under-employment, lack of organisation on the part of workers affecting their bargaining capacity are the main causes for the existing disparities.
Essay # 4. Principles of Wage Differentials:
(1) There should be a definite plan to ensure that differences in pay for jobs are based upon variations in job requirements, such as skill, effort, responsibility or job or working conditions, and mental and physical requirements.
(2) Equal pay for equal work, i.e., if two jobs have equal difficulty requirements, the pay should be the same regardless of who fills them.
(3) An equitable practice should be adopted for the recognition of individual differences in ability and contribution. From some units, this may take the form of rate ranges, with in-grade increases; in others, it may be a wage incentive plan; in still others, it may take the form of closely integrated sequences of job promotion.
(4) The wage should be sufficient to ensure for the worker and his family reasonable standard of living. Workers should receive a guaranteed minimum wage to protect them against conditions beyond their control.
(5) The plan should carefully distinguish between jobs and employees. A job carries a certain wage rate, and a person is assigned to fill it at that rate. Exceptions sometimes occur in very high-level jobs in which the job-holder may make the job large or small, depending upon his ability and contributions.
(6) The general level of wages and salaries should be reasonably in line with that prevailing in the labour market. The labour market criterion is most commonly used.
(7) The wage and salary structure should be flexible so that changing conditions can be easily met.
(8) Prompt and correct payments of the dues of the employees must be ensured and arrears of payment should not accumulate.
(9) For revision of wages, a Wage Committee should always be preferred to the individual judgment, however unbiased, or a manager.
(10) The wage and salary payments must fulfill a wide variety of human needs, including the need for self-actualization. It has been recognised that “money in the only form of incentive which is wholly negotiable, appealing to the widest possible range of seekers… Monetary payments often act as motivators and satisfiers interdependently of other job factors.”
(11) There should be a clearly established procedure for hearing and adjusting wage complaints. This may be integrated with the regular grievance procedure, if it exists.
(12) The employees and the trade union, if there is one, should be informed about the procedure used to establish wage rates. Every employee should be informed of his own position, and of the wage and salary structure. Secrecy in wage matters should not be used as a cover-up for haphazard and unreasonable wage programme.
Essay # 5. Wage Differentials and Standardisation of Wages:
Another problem connected with wages in India is that of wage differentials and standardisation of wages, a study of which is of considerable importance for formulation of wage policy.
The need for narrowing down wage differentials is generally accepted, although, it is generally agreed that the process of narrowing down wage differentials should not be carried to that extent when it may serve as a disincentive to the acquisition of skill. Wage differentials may be of different types, for example, differential by area, industry, occupation, skill, sex etc.
It is a well-known fact that wages in India vary from State to State, from industry to industry and from occupation to occupation, as well as from year to year. A study of wage level given above will make this clear. While there are differences in wage rates within each industry in each State, the regional differences are marked.
As will be seen from the minimum basic wage rates and dearness allowance of workers in some centres, the wage rate in cotton industry is found higher in Bombay than in other regions were the industry is spread over. The piece as well as time rates differ from one region to another leading to differences in the net earnings of workers of either sex.
There are also differences in wages of skilled, semi-skilled and unskilled workers, which are much larger in India than in other countries. Dearness allowance also varies widely from place to place as the basis of giving dearness allowance differs. In some cases, dearness allowance is linked up with the cost of living with different rates of different classes of workers. In some cases, dearness allowance is flat, while in others it is proportionate to incomes.
It is sometimes prescribed by the Associations of employers, and is applicable only to those mills whose owners are members of an Association. It has also been decided from time to time by Awards of the Industrial Tribunals. Dearness allowance is now linked with the cost of living with reference to the Consumer Price Index Numbers in different centres.
Necessity of Standardisation of Wages:
These differentials in wage rates are not based on any scientific principles. Each factory has made its own division of work with various categories and its own terminology for each category of work. Different processes are adopted in different industries in manufacturing, and different machines are used. This has led to waste of a lot of time, money and labour, as a large number of workers have to be treated on a separate footing for most of the administrative purposes.
These unscientific differentials in wage rates, from industry to industry and from factory to factory in the same industry and from place to place, lead to migration of the labour force from one factory to another. Sometimes, these differentials are the fruitful source of industrial unrest and disputes.
The workers are attracted generally to the better paid industries, and increase in wages is demanded in low paid industries. If the demand is not fulfilled, the resort to strike is taken and industrial peace is disturbed, which results in the loss of output and profits. The disparity in the average wage rates in different regions and industries also results in the varying labour costs.
Thus, a relatively large number of rates need not only more time, labour and staff for each factory and the industry as a whole, but also give more occasions for dis-satisfaction among the workers, and for disputes between them and the employers, either on grounds of inadequate and incomplete payments or because of want of understanding of the complicated system.
Therefore, the standardisation of wages is a pressing demand both from the workers’ side as well as from the employers’ side. The standardisation simply means that there should be some standard scale of wages for similar classes of work in industries. It does not mean equal pay for all. A standard wage does not mean a maximum rate, but simply a fair and a reasonable wage, which is uniform in its application. A standard wage may be a time-rate or a piece rate.
Essay # 6. Criteria for Wage Determination:
While the Supreme Court has broadly indicated the criteria for wage determination, these have also developed from detailed theoretical discussion in the development economies.
The criterion of capacity to pay refers to a firm’s profitability trends over a period of time. It is dependent on the competitive situation on the one hand and plans for future expansion on the other. While the overall indicator could be the ratio of net profit to net worth, supporting evidence could be drawn from the expected trend in capital investment and the share of market held by the firm’s products. The impact of an increase in compensation level is also dependent on the proportion of wage cost to total costs of production. Thus, market, technological, and cost factors determine the capacity of a firm to pay.
A rising cost of living, as indicated by the consumer’s price index, implies a fall in the purchasing power of money, leading to reduction in the level of living. While the firm may not have any control over rising consumer goods prices, there will nevertheless be a pressure to neutralise such increase in prices.
Another criterion is the level comparable pay. This comparison may be within the industry, region, or both. The criterion of comparable pay ensures that the organisation is in a position to retain the employees within the context of labour market pressures.
Labour productivity is a statistical ratio of output to labour. It implies the contribution of all factors, labour, capital, and technology, to the final output. Although a rising trend in productivity may indicate improvement in the effort of labour, it does not usually imply an exclusive impact of labour effort. While the criterion of productivity is a useful pointer, it cannot by itself be a major instrument for determination of wages.