Inter-industry wage structure in India: further evidence

Abstract

This paper is concerned with an analysis of factors contributing to wage differences between manufacturing industries. Taking the cross-section wage data for 1964, the author applies a statis tical model already tested for earlier years by other researchers. Five explanatory variables were considered : value added per worker, fixed capital per worker, the ratio of contract labour to total employment, the ratio of wage bill to the value added, and the ratio of value added less wage bill to value added. The most significant statistical result was that the average annual wage differed between industries primarily due to the fact that in some industries the level of productivity {value added per worker) was higher than in other industries. This result is in agreement with the studies by C.K. Johri and N.C. Agarwal, reported in this Journal (April 1966), and by others. The policy implications of this finding are : First, inasmuch as productivity factor is a leading variable in wage determina tion, a rational wage structure in Indian industries can only be woven around this concept. Second, in those industries where the annual wage is relatively low, an emphasis on increasing productivity seems to be called for. Both these implications need careful examination by those concerned with wage admi nistration at various levels in the economy.