Economic Highlights

New Delhi, 20 August 2010

Corporate Slavery

WORKERS NEED HIGHER WAGES

By Shivaji Sarkar

The workers and the Chief Executive Officer (CEOs) are living in two different India’s. While the CEOs are generous with giving themselves a raise, the workers have hardly got much, a mere one per cent wage hike in the last 20 years while average GDP growth was 5%.

The top executives got a raise of 33% against a 25% profit growth in 2009. Over 100 of them are earning up to Rs 80 crore a year as their salaries, a manifold rise in the last 20 years. It used to be counted in lakhs earlier.

Consider. The country is ranked ninth in the list of countries offering highest disparity in wage and productivity growth since 1990, according to the International Labour Organisation (ILO) which surveyed 32 countries. Even computer major Hewitt Associates said in a report that the average rise in India was around 6.3%, a fraction of what CEOs have got. Significantly, this is considered an unwelcome situation because coupled with high inflation, over 16% on an average, it means severe erosion in real income and the purchasing capacity of the working class.

About 175 of the over 4,500 listed companies in India have disclosed the last pay package for their CEOs and other top managers. As many as 60 companies have paid in crores to one or more of their top executives. The CEOs take high salaries as part of their ego-boosting. But the benefit to the economy is doubtful. Even if they want, they cannot spend even a fraction of what they earn. Moreover, many purchases are also credited to the companies they serve. Contrary to this an average worker spends most of his earnings on purchases of essential and some non-essentials items. It is they who keep the economy rolling and growing.

In fact, the ILO study has attributed the inequality in India to high food prices. This has a negative effect on the purchasing power of households. It notes that the decline in urban Indian households varies from 5.1 to 3.5% due to the rise in food prices, a major area of spending of the average lower and middle income groups. The poorest households are stated to have suffered the most with over five% erosion in purchasing power against the comparatively affluent with a drop of 2.2%.

Another reason for income inequality has been attributed to the growing trend of temporary jobs. Indeed, the Indian situation is not only worse than Europe but also Latin America. Average temporary jobs in the country are of casual nature and workers are paid 45% less than normal wages. This is 43% in Latin America and 20% in Europe and other western countries.

India is a growing economy while the other two regions are gasping and trying to make course corrections. It appears strange that the working class is being treated so harshly and being marginalised in an economy that is expected to surpass the growth of most major countries.

While many countries in Europe are passing through a severe financial and economic crisis and are planning a jobless growth, the situation in India baffles experts. They are intrigued at how the country would be able to sustain its growth trajectory if the working class is kept on the periphery. Declining growth in the manufacturing sector is a grim indicator that people are not flocking to buy. Even the glut in the real estate sector exposes the problem the economy is facing.

The attitude of companies in rewarding the CEOs and raising a bogey to keep wages of the workers low is intriguing. The ILO finds them following a global trend. But what it does not say is that in India poverty is at a high level and one income is shared by a larger family than an average nucleus family in the West.

Corporate India is keen on taking advantages of a shining India but when it comes to rewarding the workers or taking social responsibility like removing poverty they look towards the Government. It is the mindset of the 1950s. The corporate forgets that the situation had led to a socialistic pattern of sharing the wealth with a larger Government role that had marginalised them. The protesters at the World Trade Organisation (WTO) meet in Seattle had raised the issue of “corporate slavery”. Not many possibly took note of it but it may be the beginning of a new era if the corporate do not mend their ways.

The Government has been tolerant and helping corporate growth. But the corporate world is not paying it back. The social turmoil against corporate expansions in Orissa, Karnataka and UP is a manifestation of a trend that may have started in Seattle. An economic failure need not happen because of the Government, which is easy to blame for all the ills.

A drastic change in the outlook of corporate is a necessity. They need to ponder whether the two-thirds of top executives, who pocketed $ 1 million or more last year needs to be rewarded more at the cost of the workers whose toil, as well as pay cuts in many cases, has brought them high profits.

Though it looks like an innocuous comparison, the corporate need to learn from recent history. The Soviet Union did not collapse for political reasons. It was the high production and low wages there that led to a glut and political turmoil. So far in India, the situation is being controlled by the Government, which still continues to be model employer despite some changes in its outlook. The number of Government employees is shrinking. So the safety valve that had been at work may not be effective for long.

The hire and fire principle to earn high profits is not a long-term panacea. The corporate should realise that they are social entities. Any degradation would ultimately recoil on them. Singur represented a mindset and so does, to some extent, the situation in Dantewada. Given that unwise steps provide strength to the movement and builds up a psyche.

Clearly, the corporate should listen to the ILO. Which states in its report “rising income inequality represents a danger to the social fabric as well as economic efficiency when it becomes excessive” and calls upon the corporate world to adopt long-term structural reforms. Will they? ---- INFA

(Copyright, India News and Feature Alliance)