Matter of industry workers and wages

The government's concern for industry workers is heartening, especially its instructions that they be paid full wages despite the shutdown. It will be impossible to maintain the quarantine if too many people's worries about food and bills force them out to hunt for work; regardless of the circumstances. So, simply put, the better the wages of workers are protected the more effective the overall lockdown will be. But it is one thing to pass orders that suit the moment and look good in the media and quite another to make sure that it is also practical and implementable. In this regard, it will be instructive to see how a request by the Employers' Federation of Pakistan (EFP) to the Sindh government, regarding establishment of an emergency fund for workers' wages, plays out. In a formal letter, EFP has suggested that last five years' contribution by enterprises to the Workers Welfare Fund (WWF) - provincial domain since the 18th Amendment - be refunded for utilisation in the fund, along with other measures, so it is possible to pay salaries for the next three months.
So far EFP has complied with the Sindh government's notification, under the Payment of Wages Act, requiring industries not to lay off workers and pay full wages during the lockdown. And even though the notification was not exactly within the strict confines of the law, since wages according to the same act are only payable upon fulfilling terms and conditions of employment, EFP still prevailed upon industries to pay full wages for March 2020 in light of the extraordinary situation. Yet there's only so long this free ride can go on. With almost the entire sector shut down, with the exception of enterprises providing essential services of course, it is no surprise that serious cash-flow problems have begun surfacing. And unless the government steps in immediately to help find a workable solution, as the letter demands, it will clearly not be possible for industries to meet the burden of salaries for the month of April. The most straight forward suggestion is for employers to exercise their legal right and lay off workers for 14 days with half pay, with the government meeting the other half from WWF, to cover wages for April and see if things get any better by May. But should matters not improve, or deteriorate and industry is still unable to function, then the government will clearly have to step forward and play a much larger role or prepare for layoffs, litigation and a lot of social unrest.
It is the simplest market principle that overhead costs without suitable income and profits lead to layoffs and shutdowns. No industrial unit has reserves enough to pay labour that is not productive, whatever the reason may be. Instead, industry works on a debt equity ratio and has borrowed working capital. And even where there is surplus capital, diverting it indefinitely towards idle workers is simply bad economics. Sooner rather than later the cash crunch is bound to raise red flags of bankruptcy. How will the government order employers to keep making payments in such scenarios? And how would it deal with public agitation that is bound to follow; with a pronounced effect on social mingling and spreading the virus even further, of course? There is an urgent need to think this through.
It only makes things worse that there is still no light at the end of the tunnel and nobody can tell just how long the lockdown, here or anywhere else in the world, is going to last. That means industry does not know how long it will be required to take a hit so workers can be paid. And workers, for their part, have no idea how long they will get their salaries if there is no work at all. That, inevitably, will give rise to panic at some not-too-distant point in time. The only way to keep everybody calm, the importance of which cannot possibly be overstated, is for the government to hold serious talks with all stakeholders and devise a crystal clear modus-operandi. EFP complains of rarely being consulted by the prime minister or his economic team, who prefer to depend on the advice of an elite group of businessmen only. This must change, and mainstream industry representatives should be taken on board before making important decisions. Going forward, the first order of business must be ensuring wages for April. Then, depending on whether any relief comes by May, the make-up of the emergency fund, as suggested by EFP, and who will foot how much of the bill, can be finalised. But there should be a clear plan of action, and every stakeholder should know precisely what the official response will be in all possible situations.