Hard on the heels of the recent survey which ranked the productivity of Indian labour among the lowest in the world, another study by the  business federation, FICCI, of the 100 most profitable companies in India brings out the statistic that during the period 1989 to 2001, while the total cost of production increased 600 per cent from Rs. 59,000 crore to Rs. 3,68,000 crore, total wages increased by just 300 per cent from Rs. 6,021 crore in 1989 to Rs. 20,000 crore in 2001. Put another way, the survey says that wages declined from 11 per cent to just 5.56 per cent of the total cost of production.

Since the survey apparently did not go into the causes of the relative decline in the corporate wage bill, both management and labour have given their own reasons for this state of affairs. That there are many possible causes, or combinations of reasons, is obvious from the list below:

There are, of course, many other reasons put forth, depending on whom you talk to, but essentially they can all be fitted into one or the other of the categories above.

If one ignores the human distress involved in such a scenario, most of us would like to believe that productivity of labour is increasing. But can one really ignore the human element in a country like India with a one billion plus population and a low rate of literacy? If productivity is, indeed, increasing, and companies are hiring a lesser number, but more competent, people, it means that unemployment is also rising. Which brings us to our educational policy which is still based on anachronistic criteria. India is churning out millions of graduates every year with only a very small percentage of them realising, or being able to afford, the need for specialised further education. Once upon a time, becoming a graduate automatically assured a person of a job. No longer. Today, even bus drivers and conductors are graduates, not because it is a condition of employment, but because this is the only kind of job they can get.

Coming to reason No. 2, legally, labour cannot be laid off without due legal process which is loaded in favour of the employee. It also takes a very long time as the process is subject to various levels of scrutiny. But there are backdoor methods of getting rid of ‘permanent’ staff in the private sector which is practised by most companies, especially the megacorps with many branches. The most common is transferring an employee to a distant location. Very few can afford to uproot their families, especially if they have school-going children, and start building a new life in a new city. The alternative, the breadwinner accepts the transfer but leaves his family at home, is not viable in all situations. Since an employee cannot legally refuse a transfer, and can only plead for a stay on compassionate grounds which may not be accepted by a management bent on getting rid of him, the only alternative is to resign in the hope that he can get another job in the same town.

Such ‘vacancies’ are usually not filled by the management. In case it is absolutely necessary, a person is employed on contract which means that the management’s legal obligations to him are minimal and he can be dismissed whenever necessary, sometimes even without notice.

Reason No. 3 is probably the most cogent. When jobs are advertised for half a dozen placements, they invariably attract thousands of applicants. In such a situation, it is easy for management to bargain for the lowest acceptable salary.

The last two reasons, that is, technology which reduces the need for manpower and globalisation, cannot be wished away nor can blame be attached to management for labour attrition on these counts. In fact, without the use of the latest technology and a competitive edge, most companies would have to shut down as they cannot survive in the global marketplace. On the other hand, it should be realised that technology and improved management techniques do not happen of themselves. It takes people to conceive and market both the technology and the management techniques, thus providing avenues for more employment although only for specially qualified people.

What it all comes down to is that our system of education has to be completely overhauled. Subsidies are anathema in a modern economy but because of the huge population and largely unqualified majority of Indians, grants-in-aid will continue to be an essential component of Indian college education, especially for post-graduate and vocational studies. Today, such grants are mostly spent on salaries of teachers, whose number keeps increasing as more students seek a college education. In fact, government grants have not increased in proportion to the number of teachers required. Which means that either teachers are not employed because there is no money to pay them, or that under-qualified people are employed. It also means there is no scope for teachers to keep themselves abreast of the latest developments in their subjects. All this goes to lowering the standard of college education which, in turn, leads to more youth joining the group of the educated unemployed. There is a strong case, therefore, for drastically raising grants and other financial assistance to colleges and an even stronger case to ensure that the funds are properly deployed.

Secondly, emphasis needs to be shifted from academic to professional and vocational courses. This is an area where the public colleges have fallen far behind. They are just not capable of rising to the challenges of fast growing new technologies which offer major employment opportunities. The information technology industry is a good example. The private sector anticipated the need for trained IT personnel and flooded the country with training institutes, both recognised and unrecognised. Many of them were fake institutes which cheated eager students out of huge fees but, by and large, they were instrumental in lakhs of young people getting jobs, at least in the heyday of the IT boom.

The problem here is that only a small segment can afford the huge fees charged by the private institutes. The child coming from a village school where education is free can, at the most, hope to join a good government college, if he has adequate marks. He cannot even think of becoming an engineer, a doctor or an IT professional. And talking of doctors, why is it that where once Government PGIs were considered the best training grounds for the medical profession, it is now the private colleges that attract the most students?

This is another strong case for increasing financial aid to government colleges so that they can pay their teachers better, provide the best of facilities and equipment and introduce new courses as new technologies and areas of employment develop.