The wages of wage

In the International Labour Organization’s (ILO’s) architecture, the three social partners—workers, employers and government— have a well-established tradition of meeting often and developing a consensus after intensive, provoking and challenging discussions, debates and heartburns. The underlying factor is to ensure that this social dialogue leads to protection of jobs, adherence to human rights, enhancement of employment opportunities, compliance with the core ILO Labour Standards, and respect among social partners. Despite the traditional culture of distrust, polemics, demagoguery, or politics, the positive outcome is that workers and employers display pragmatism and take concrete efforts to reach a solution.

The ILO constituents in Pakistan are Employers Federation of Pakistan, Pakistan Workers Federation and Federal Ministry of Overseas Pakistanis and Human Resource Development. All of them are signatories to the ILO Decent Work Country Programme and have pledged to be active in achieving equitable, inclusive and sustainable development by providing productive work, fair income, job security, and social protection. There is a continuous social dialogue that aims to achieve the principles of Decent Work and the outcome is a clear understanding that decent wage as a component of Decent Work agenda brings an inclusive social equilibrium to maintain a balance between employment and quality of life.

The union at the plant or industry level goes through the rituals of presenting a Charter of Demand after the expiry of the Collective Bargaining Agreement and after protracted and intense rounds of negotiations and consultations, spiced up with threats of strikes or lockdowns, more often than not, manage to zero in towards an agreement. However, the mainstay of any agreement is usually increment in wages, classification of wages, and determination of bonuses, allowances, and incentives. The quid pro quo that normally leads to an agreement is that the union, in its capacity as Collective Bargaining Agent, stays silent on the issue of contract workers, non-compliance by employers of some of the eight core ILO Labor Standards, and presence of temporary workers or even apprentices who perform the same tasks alongside permanent workers, etc. Moreover, in non-unionized plants, the employers unilaterally decide wages and benefits, either keeping in mind the legally prescribed amounts or fix the emolument packages as per the demand and supply position of availability of workers.

There are five modes of wages that need to be highlighted:

Real Wages:

These are measured in terms of inflation, that is, actual purchasing power of the worker. Purchasing power determines the real wages. What it means is whether the worker is able to procure, afford, and be reasonably comfortable with the basic requirements of life such as food, clothing and shelter that are immediate necessities. Free or subsidized housing, education for children of workers, medical benefits, or company transportation are added to determine real wages. If the overall trajectory of these is on an uptick, it means that the real wages of the workers are higher. However, in Pakistan, steep increases in the cost of living and prices of essentials have created more poverty, social issues and disenchantment. The social protection floors have not been innovative or efficient enough to provide any sort of meaningful monetary cushion or safety nets, especially for the marginalized population. Real wages do get factored in during any CBA negotiations with unions but approach is focused on the actual monthly wages that workers demand.

Nominal Wages:

The amount of money paid as wages is called the nominal wage or money wage. Nominal wage is thus the monetary expression of the reward for labour. Wages may be paid either in terms of money or in terms of goods. In the agriculture sector, workers who till the farms and slave for long hours every day are given the share of the crop proceeds. Usually, this share is in the form of produce rather than a cash outlay. In the industrial and service sector, the employees receive their remuneration that is basic salary plus allowances, on designated days while their benefits, such as bonus, leave encashment, and gratuity that have accrued are paid or credited after one year of service. The Nominal Wage is increased either through CBA or at the discretion of management or, if there is no union at the plant, then as per tradition, such as annually or biennially. There are usually allowances given to employees such as travel allowance, entertainment allowance, attendance allowance, medical allowance, etc. Technically these are not part of the Nominal Wages; nevertheless in majority of enterprises these become, and are considered to be, part of the Nominal Wages and hence employees or unions often demand that bonus, leave encashment and gratuity should be calculated accordingly.

Family Wages:

The amount of money that the worker wants to provide for the needs of the family is usually termed as Family Wages. The concept of Family Wages was initially promoted by Eleanor Rathbone, British Member of Parliament and long-term campaigner for family allowance and for women’s rights, in 1940 in her book “The Case for Family Allowances”. She stated that “society should include in its economic structure some form of direct financial provisions for the maintenance of children, instead of proceeding on the assumption that men’s wages or salaries are… sufficient for the support of their families”. However, economists such as Thomas Malthus argued against providing some sort of Family Allowance to the employees because it tended “to act as a discouragement to thrift and the individual’s sense of economic responsibility”. Rathbone was also concerned with the status of women in the labour market and argued that since Family Wages meant that men had the right to better paid jobs because they had to support wife and children, it was impeding women’s struggle to achieve gender equality and opportunities.

Pakistan Workers Federation has estimated that the Family Wages of a worker plus wife and three children should be at least PKR 76,000 while the Minimum Wage is between PKR 20-25,000 depending on which Province the worker is based. The ground reality is that neither the government nor the private sector is even willing to discuss or comprehend the concept of Family Wages and hence it is left to union leaders to passionately demand this in their jalsas and meetings, especially on May First every year.

Living Wages:

In recent times, there has been a growing movement within the ranks of ILO constituents as well as many NGOs to introduce the structure of Living Wages rather than focusing on Minimum Wages or Nominal Wages. The objective is to support wage improvement strategies and programmes to raise the workers’ wages. Some of the well-known global organizations have joined the bandwagon and are campaigning, lobbying and advocating for introduction of Living Wages.

According to The Global Living Wage Coalition (GLWC), the definition of Living Wage is “the remuneration received for a standard workweek by a worker in a particular place sufficient to afford a decent standard of living for the worker and family. Elements of a decent standard of living include food, water, housing, education, health care, transportation, clothing, and other essential needs including provision for unexpected events”.

The GLWC is committed to using the Anker Methodology as the basis for producing high quality, consistent, and objective information about living wages and wage gaps. This methodology is the brainchild of Living Wage experts Richard Anker (ex ILO) and Martha Anker (ex WHO), who spent over 15 years testing and perfecting its various aspects. There is an imperative need for Pakistan’s three social partners to study, debate and understand this methodology rather than having half-baked knowledge of the subject or making impulsive remarks on Living Wages at various forums. It is advisable to mutually decide on a process to obtain a credible and realistic Living Wage estimate that stakeholders are likely to accept as reasonable regardless of whether or not employers are satisfied with the dynamics of Living Wages.

Minimum Wages:

Although there are five modes of wages, in Pakistan, the social partners mostly deliberate and agitate on Minimum Wages. In the past, the announcement of increase in Minimum Wages was through the Federal Budget but after the 18th Amendment, the Provinces set up tripartite Minimum Wage Boards to decide and fix the Minimum Wage that must be legally paid to the workers. It goes to the credit of the Workers’ Representatives on these Boards who tend to agree on a justifiable and acceptable Minimum Wage increase even though the dice is loaded against the Employers’ Representatives because the Government’s Representatives customarily tilt in favour of workers.

Unfortunately, in 2021 political friction vitiated the prevalent harmonious relationship between the social partners. Each Province announced its own Minimum Wages without going through the Minimum Wage Boards. More ominously, the Chairman of the Sindh based political party heedlessly proclaimed PKR 25,000 per month despite the fact that Federal and rest of the Provinces had fixed PKR 20,000. Naturally, the Sindh Cabinet had to display obeisance; ergo, it became part of the Finance Bill and now the three social partners are fighting it out in various courts. Who will eventually be at a disadvantage? The unskilled and youth who would have a difficult time finding employment. Notwithstanding this 43% increase in Minimum Wages in Sindh, the overarching fact is that nearly 60% of employers are not even paying the erstwhile Minimum Wages of PKR 17,500 and it is estimated that over 80% enterprises will not pay the new rates or will reduce unskilled and casual workers. Large scale industries have even talked about moving from Karachi to Faisalabad or Multan and some are scouting for land in Hub or Winder in Balochistan. Industrialization in Sindh will suffer tremendously.

Conclusion:

According to the ILO’s definition, Social Dialogue means the practice of Tripartism between governments and the representative organizations of workers and employers to achieving solutions and to building up social cohesion and the rule of law through, among other means, eight core International Labour Standards. The role of government is primarily to be the facilitator and to ensure that these standards are complied with by all three social partners. It should not be the domain of any political party or even government to unilaterally announce a Minimum Wage. It would be in the interest of all social partners if the Sindh-based political party withdraws the abnormal and unjustifiable increase and reverts the matter to the Minimum Wage Board to be decided by consensus. This gesture can help to create trust, confidence and beneficial climate for industrial peace and economic prosperity. “The great challenge of the twenty-first century is to raise people everywhere to a decent standards of living while preserving as much of the rest of life as possible”— American biologist Edward O. Wilson

(The writer is a former President of Employers Federation of Pakistan Twitter: MajydAziz)

Copyright Business Recorder, 2021