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Monday, October 1, 2007

Debate on Pay


Manishinath Bhawan,

A-2/95 Rajouri Garden,

New Delhi. 110 027.

Dated: 1st October, 2007

Dear Comrade,

We place hereunder the two articles that appeared in the
Financial Express today. The subject matter of discussion was :should
the Government salary be at par with the private sector: We were
asked to respond to this question. Our article has come in its full

The Government has today announced the raising ceiling
limit for calculation purpose of Bonus from Rs. 2500 to Rs. 3500 a
month. The UNI news in this regard is published hereunder. It
requires another order from the Ministry of Finance for those who are
in receipt of adhoc bonus and from the concerned Ministries in the
case of PLB. In the case of Govt. has already issued the bonus order
without raising the ceiling limit. This order will require to be
revised. In the light of the decision of the Govt. we hope that the
bonus in the case of Postal, Defence and railway employees and others
in whose case, the bonus order is yet to be issued, will get the
benefit of increased bonus this year itself. The Confederation will
take steps to get the "adhoc bonus" order revised on seeing the order
in the case of PLB.

UNI News:

New Delhi. Oct. 1. (UNI) The Centre today brought the employees in the
construction sector under the Bonus Act and raised the eligibility
limit for payment of Bonus from Rs. 3500 to Rs. 10000 a month and the
ceiling for calculation purpose from Rs. 2500 to Rs. 3500 a month. The
decisions were taken at a meeting of the Cabinet chaired by the Prime
Minister Manmohan Singh, Labour Minister Oscar Fernandes and
information and Broadcasting Minister Priya Ranjan Dasmunsi told

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Print Story

Growth has made pay parity possible
KKN Kutty
Posted online: Monday , October 01, 2007 at 0024 hrs

A wage is considered the product of collective bargaining reckoned
with reference to the productivity and profits of an enterprise. Trade
unions play a vital role in making the bargain effective from the
workers' standpoint. In the case of government employees, though the
right to form associations is afforded, the right to strike is denied.

Having thus shut out collective bargaining, the periodical wage
revision for government employees had been—and continues to be—through
the Pay Commission. Even before the Royal Commission (presided over by
Raymond Priestly) on UK's civil services propounded the theory of
"fair comparison" as the primary principle of wage determination, the
First Pay Commission set up by the colonial rulers in the wake of the
phenomenal price rise in the post-war economy of our country, had
advocated that a fair relativity should be maintained between the
rates of pay of civil servants and outside rates, with a caveat that
in no case should pay be less than a living wage.

The Second Pay Commission, which came into existence in 1957-59,
asserted further that comparison should be with the rates of
remuneration in enterprises in which personnel problems, viz,
recruitment, condition of service etc, are dealt with in a systematic
manner. The commission went on to suggest that while at the lowest
level, the socio-economic necessity of providing a fair wage or a
living wage is to be adhered to, with regard to the highest salaries,
retaining persons with requisite talent and qualifications must be an
important criterion. The commission approvingly quoted the dictum
incorporated in the First Five-Year Plan report that the "wages in
public undertakings should not be less favourable than those
prevailing in the neighbouring private enterprise".

It is also pertinent to note that the Royal Commission was of the view
that "fair comparison" as the primary principle of wage determination
is not only fair to employees but also to the community at large. For,
if the government, which represents the interest of taxpayers, pay
what responsible employers pay for comparable work, citizens cannot
reasonably complain that they are being exploited.

Having stated this laudable principle of wage determination, none of
the pay commissions translated it into reality. The 15th Indian Labour
Conference (ILC) resolution on "need-based minimum wage", basing upon
the Dr Aykroyd formula of a net intake of food which provides 2,700
calories for an average Indian adult of moderate activity, was
deliberated at length by the Third Pay Commission and discarded.

It is the bounden duty of the government to provide the "need-based
minimum wage" computed on the basis of the 15th ILC norms at the
lowest level of the government hierarchy, given the fact that the
country's economy has registered a growth rate of 8-9% in recent years
and its revenue has gone up considerably, whereby the wage bill as a
percentage of tax revenue has come down to 9% today from 21% in

In the matter of salaries at the highest level, the government has to
be guided by the requirement of retaining persons with talent, ability
and qualifications needed for a highly complex job. Some of the large
corporate houses in the country pay exorbitant salaries to their
executives. This has led to personnel at various levels in government
service migrating in search of the fabulous monetary benefits offered
by private entrepreneurs. While it would be inadvisable to disregard
this fact, the government's decision in the matter will have to be
tempered with the equally important requirement of maintaining a
reasonable ratio between the minimum and maximum salary. The principle
of wage determination for government employees has undoubtedly to be
the basis of a fair comparison of wages obtaining in private and
public sector undertakings.

—The writer is secretary-general of the Confederation of Central
Government Employees & Workers

Print Story

Consider the perks & job security, too
Alakh N Sharma
Posted online: Monday , October 01, 2007 at 0026 hrs

Globalisation and the consequent stiff competition in the labour and
product market has led to a demand from several quarters for the need
to have parity in pay and allowances between government/ public sector
jobs and those in the private sector. It is argued that in the absence
of such parity, there will be a flight of talented and competent
manpower from government to private sector, seriously eroding the
efficiency of the former. Such a trend is already visible to some

Although it should be admitted in general that such a challenge might
exist in a few sectors, such an argument has serious limitations, and
is in fact dangerous at this stage of our development. First, the
nature of a government job is overwhelmingly that of public utility
and non-commercial. That is why such jobs are mostly treated as
services and hence the nomenclature 'Indian Administrative Service',
'Indian Foreign Service', etc. Most public utilities are heavily
subsidized by the government (and, hence, taxpayers' money).

In such a situation, it would be erroneous to treat these jobs in the
same category in those in the profit-making private sector. This also
suggests that while selecting people for government and public sector
jobs, the spirit of service should be kept in mind. However, a
distinction may be made between public sector commercial undertakings
and public utilities. While some parity in crucial jobs (not CEO)
between public sector commercial undertakings and private sector may
be considered, the social responsibility of the former (eg, lending by
commercial banks to the priority sector, etc) should also be kept in

Second, most government jobs have many other hidden benefits such as
housing, shorter working hours and a higher welfare component
(pension, etc). Around 90% of employees in the private sector do not
get pension, whereas it is almost universal in the case of government
jobs, notwithstanding recent reforms in the pension system. A
secretary to the government of India living in a posh Delhi colony
with several other perks cannot be compared only in terms of so-called
monthly salary with private sector professionals. That is why the real
difference between the two groups may not be as high as is generally
thought to be. Further, it should be kept in mind that an overwhelming
large percentage are disadvantaged as their counterparts in

Thirdly, there is almost universal security of job in the government
sector, against high risks in private sector. The psychological and
mental stress through which professionals in the private sector go
through is enormous. Even lower middle and lower level employees in a
vast majority of the private sector face extreme uncertainty.

Lastly, the very high salary and perks for a small percentage of
people is also unethical as well as has the potential of leading to
social unrest in a country like India with widespread poverty and
where more than half of rural labourers do not get a minimum wage
(which is just a subsistence wage).

And, ironically, there has been a significant growth in consumption by
middle and higher income groups. Such a widening social divide is very
unhealthy for Indian society and its polity. The incidence of Naxalism
and violence in a vast tract of rural India is a manifestation of such
acute social and economic deprivation.

Therefore, one should not loose sight of these aspects while
considering an income and pay policy. There is need for a delicate
balance between equity and social stability on one hand, and meeting
the challenge of globalisation on the other. Hopefully, the Sixth Pay
Commission will not be blindly dictated by market considerations.

—The writer is director, Institute for Human Development, New Delhi

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