Collective Bargaining as Wage Fixation Method

Collective Bargaining Negotiation about working conditions and terms of employment between an employer, a group of employers or one or more employers organizations, on the one hand, and one or more representative workers organizations on the other with a view to reaching agreement (ILO Workers Manual) Objective of collective bargaining is to come to an agreement. Process of collective bargaining is that divergent viewpoints are put forth by the parties concerned, and through negotiations, a settlement is arrived at.

Levels of Collective BargainingI. Plant Level Basic or micro level unit Negotiations conducted between management of the plant & union(s) of the plant Pioneers in this field are Tata Iron & Steel Co. Ltd. And Tata Workers Union (Jamshedpur)

Levels of Collective Bargaining..contII. Industry Level Broader in scope as compared to Plant level Several units in same industry band together & form an association, which negotiates with a union having a similar status In Ahmedabad, the Mill owners Association negotiates with the recognized union, the Textile Labour Association(TLA)

Levels of Collective BargainingIII. National Level Scope much wider, however uncommon in India Representatives of the trade union & the employer negotiate and arrive at a settlement Example, 1956 agreement on bonus for plantation workers between the representatives of the Indian Tea Planters Association and Indian Tea Association and representatives of HMS. This was a tripartite conference/agreement convened by the Government of India.

Obstacles to Collective Bargaining in IndiaProgress of the Collective Bargaining process is not very encouraging in India. Most of the unions and management lay emphasis on adjudication rather sorting out issues themselves. Several factors are responsible for this: Multiple unions Non-recognition Political orientation Defective laws Mediation by political leader

Components of employee remunerationRemuneration

Financial

Non-financial

Basic wages

Incentives, Individual plans Group plans

Fringe benefits P.F. Medical care Accident relief Health and Group insurance

Perquisites Car Club membership Paid holidays Furnished house Stock option scheme

Job context Challenging job Responsibilities Growth prospects Supervision Working conditions Job sharing etc

Collective Bargaining as Wage Fixation method Significant feature of collective bargaining is the wages that will be paid for the work done by the employees union is rarely involved in setting the original job rates; management does this union is actually involved in enhancing, or, at least, preventing a decrease of wages major criteria used by unions and management in setting wage levels can be classified as:(i) measures of equity; (ii) measures of need; and (iii)measures of contribution

Collective Bargaining as Wage Fixation method..cont Most commonly used criteria in setting wage levels:x x x x x x Comparable wages Cost of living The living wage Ability to pay Productivity Purchasing power

Another area of significance is that of productivity bargaining and has gained increasing attention in the Indian industrial relations system.

In such agreements advantages such as higher wages or increased leisure are given to workers for accepting changes on established work practices and organization of work itself, thus reducing/eliminating waste and leading to more effective working

Collective Bargaining as Wage Fixation method..cont Randle and Wortman state: Productivity usually refers to output in physical units per man-hour of work. It is a measure of the relationship between the volume of goods produced and one factor of input-labour time. However, labour is only an input and there are several other variables such as more efficient utilization of fuel, more economical materials; technical improvements in machines; in organization and in processes; the skill and effort of the work force; the efficiency of management and the state of Labour Relations. Increased productivity is usually reflected in increased ability to pay and therefore industries with high or increasing productivity are generally able to pay high wages.

Collective Bargaining as Wage Fixation method..cont In India, collective bargaining as one of the methods of wage fixation has been adopted in many industries. Most of the agreements are at the plant level, though some significant industry level agreements have also been concluded Apart from dealing with issues relating to wage matters, collective agreements cover a wide range of aspects of employment from recruitment to retirement.

Scope of Collective Bargaining Wage matters Wages Bonus Overtime Paid holidays Paid sick leave Safety wear Production norms Hours of work Performance appraisal Workers participation in management Hiring Fixing of job evaluation norm and Modernization.

Collective Bargaining vs. Negotiation Skills+CB is a process by which the terms and condition of employment of workers areregulated by agreements between their bargaining agent and their employers. - Negotiation, on the other hand, is a process of resolving conflicts between two or more parties wherein both or all modify their demands to reach a workable compromise.

+The process of CB also uses negotiations to reach a mutual consensus. - While negotiating issues, parties shift their stand from an idealposition to a settlement point, which is mutually agreed upon.

+The position of the settlement point depends on the relative bargaining strengthand skill of the negotiator. - The sacrifices to be made and the concessions to be yielded, depend to a large extent on the negotiating skills of the bargaining agent. If he is powerful, he will have his way. If this power is challenged on justifiable grounds where other people see reason, he may have to yield his ground.

Suggestions for effective Collective Bargaining To create conditions for strong, stable representative by union Recognition by the law of the trade unions Political leadership to be replaced by internal workers leadership No political interference Both management and unions should adopt peaceful means of settling disputes Adjudication to be resorted to as last resort, when all other remedies have failed.

Concepts of Wages Minimum Wages:Minimum wage is the wage that is able to provide not only for bare physical needs but also for preservation of efficiency of worker plus some measure of education, health and other things.

Fair Wages: Fair wages is an adjustable step that moves upaccording to the capacity of the industry to pay, and the prevailing rates of wages in the area of industry.

Living wages: Living wage is that which workers canmaintain the health and decency, a measure of comfort and some insurance against the more important misfortune of lie.

WagesPayment for labor or services to workers, especially remuneration on an hourly, daily, or weekly basis.

Salary is a fixed periodical payment paid to a person for regular work or services.

Wage is usually paid by the day or week for work or services which are of a more irregular nature.

The demand for wages has never been fully met. Wage raise in one company will inspire unions in other company to pitch tents demanding similar rise in wages.

Wage PolicyWage policy refers to systematic efforts of the government in relation to national wage and salary system. Purpose: To regulate the structure of wages and salaries with view to achieve economic and social objectives of the government. To give to workers a share in fruits of economic development. To set is weak. minimum wages for workers whose bargaining and wage power of

To bring about more efficient allocation human resources through wage and salary differential. To abolish payments. malpractices and abuses in

utilization and

salary

Payment of Wages Act, 1937

To prohibit any delay or withholding of wages Authorizing all state governments to set up industrial tribunals which would look into disputes relating to remuneration

Industrial Disputes Act, 1947

Minimum Wages Act, 1948

Fixation of minimum rates of wages to workers

Equal Remuneration Act, 1976

Prohibits discrimination in matters relating to remuneration on the basis of religion, sex etc.

With all these Acts in place, are there no disparities in wages?

Wage Policy in IndiaIn an assessment of the general wage policy the first task is to identify the indicators for such evaluation. Indicators selected for this purpose are:i. ii. iii. iv. v. The state of industrial harmony; The changes in workers level of living; Changes in productivity; The impact of wages on prices; and The share of wages in the value added by manufacture.

i.

Industrial Harmony

Index of industrial harmony is the number of man days lost owing to industrial disputes It would not be unreasonable to assume that the trend in time loss would be considerably influenced by disputes relating to wages and cognate issues as they constitute nearly 40% of the total number of disputes even now Apart of the increased time loss could be attribute to the number of new units established in recent years and the consequent increase in industrial employment and improvements in the methods of reporting mandays lost

ii. Levels of living Level of living is a function of real wages Industrial relations machinery set up by the Government to settle wage disputes worked in such a manner as to result in a restraint on wages Real wages after a rise in the period 1947 to 1955 have been declining subsequently Net effect of the operations of the industrial disputes machinery on wages of factory workers has been that in 1965 the industrial workers at the lower levels were earning hardly a real wage corresponding to that of the year 1952 On the whole, between 1952 and 1965, while per capita real income has improved, the real wages of workers have, with few exceptions, at best not fallen. But the situation has deteriorated since 196566 due to a further rise in living costs.

iii. Changes in Productivity Labour productivity and changes therein are difficult to measure and there are no reliable indices available in this respect. The main difficulty in measuring labour productivity arises owing to the output not being an exclusive product of labour. Capital, technology and managementall contribute to it along with labour and these seldom remain constant. Production per worker has increased by about 63 per cent between 1952 and 1964. A part of it must have been contributed by labour whose real earnings have remained almost static during the period.

iv. Impact on Prices Between 1952 and 1958, money wages as a percentage of total output dropped from 13.7 to 11.4. Between 1960 and 1964, on the basis of the new series of the Annual Survey of industries, the drop was from 10.9 to 9.7 The decline varies from industry to industry but has been registered in all cases, except in case of fair sized units in the match industry where wage costs as a proportion of the cost of production have gone up.

v. Share of Wages One has to take into account the share of workers in the value added by manufacture In this indicator, only two shares count: a. Of employers and those who have provided capital in the expectation of a dividend and b. Of workers

The percentage of wages to the value added by manufacture, shows a decline from about 50 per cent in the period 1949-50 to about 40 per cent in 1958. This trend seems to have continued in the subsequent years

Hence: Increases in money wages of industrial workers since Independence have not been associated with a rise in real wages nor have real wage increases been commensurate with improvements in productivity Simultaneously, wage costs as a proportion of total costs of manufacture have registered a decline and the same is true about workers share in value added by manufactures Wage disputes under these conditions have continued to be the single most important cause of all industrial disputes. Industrial wages should not be out of alignment with:a. b. c. d. per capita national income, wages earned in the agriculture/cottage industries, the general level of earnings of the self-employed, and levels of productivity.

Wages DifferentialWage differential refers to differences in wage rates due to the location of company, hours of work, working conditions, type of product manufactured, or other factors. It may be the difference in wages between workers with different skills working in the same industry or workers with similar skills working in different industries or regions.

Employees in MNCs are paid higher. Different industries have different wage structures resulting in disparities in remuneration for identical works. Wide gaps exist between wages of employees of organised sector vs. unorganised sector.

Occupational DifferentialsDifferent occupations require different qualifications, skills and different degree of responsibility 1. To induce workers to undertake more demanding, more risky jobs. 2. Encourage workers to develop skills in anticipation of higher earnings in future. 3. To perform social function by way of determining the social status of workers.

Regional (Inter-Area) DifferentialsWorkers in same industry and the same occupational group, but living in different geographical areas, are paid different wages.

Irritating climate Isolation Disparities in cost of living

Inter-Industry DifferentialsArise when the workers in the same occupation and in the same area but in different industries are paid different wages.1. 2. 3. Extent of unionization Employers ability to pay/ product demand in market Provides opportunity for workers to switch to higher wage industries.

Personal Wage DifferentialsArise because of differences in personal characteristics (age or sex) of workers who work in the same plant and the same occupation.In occupations which involve muscular work, women workers are employed but paid less than men workers

Equal pay for equal work

I.L.O. convention (No. 100) Industrial courts Labour Tribunals Minimum Wages Committee Fare Wage Committee

Sector DifferentialsDepends upon nature of workers group (organized/ unorganized) and level of economic development of the sector.

Agricultural workers are not able to better their living conditions, whereas workers in industrial sectors have their own unions to fight for them.

Summary

The concepts of trade unions, wages and wage differentials are over a century old in India. Indias economic development still needs a big push and the factors unions, wages and wage differentials can play a vital role.