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Real Wages in India 1939-50 Shreekant A Palekar The question of wage policy has come to the forefront following the demand by the Indian National Trade Union Congress and other trade unions for a blanket rise of 25 per cent in wages. Further importance has been lent to this question by the proposal, which was recently adopted at a conference of State Labour Ministers, to appoint Wage Boards in certain industries. These Boards, it is understood are to undertake the task of wage fixation in the light of trends of wages since 1939. The First Five Year Flan aimed at restoration of re a[ incomes to the pre-war level. The success of the Second Five Year Plan hinges not only on the proportion of the National Product that is invested for development, but also on the manner in which the bulk of the total National Product is distributed among the various social groups. Dr Palekars study of real wage trends in India from 1939 to 1950, we trust, will be found useful us a basis for further discussion of wages policy in India, The author who is Director Reviews and Research ) with the Tariff Commission, Government of India, wishes to make it quite clear that the views expressed in this article are his own and do not represent the views of the Government of India or any department of the Government. The present article forms part of a doctoral dissertation completed under the guidance of Prof T Dunlop and accepted by Harvard University. The author wishes to express his indebtedness to Prof Dunlop for his valuable comments on the original thesis. D E A L wages i n I n d i a have s o f a r been the subject of very l i t t l e study. Research in this field has been hampered by the l a c k o f adequate data. I t was only after the passing of the P a y m e n t of Wages A c t in 1936 t h a t data on wages p e r t a i n i n g to the various provinces of B r i t i s h I n d i a became available. T h e a n n u a l reports on the a d m i n i s t r a t i o n of the P a y m e n t of Wages A c t 1936 give figures of the average d a i l y number of w o r k ers employed a n d the t o t a l wages paid t o t h e m . The A c t came i n t o force in M a r c h 1937 a n d regular a n n u a l reports f o r the various States have been published since 1939. It was, therefore, decided to select, f o r the present w o r k , 1939 as the base year a n d to place sole reliance on t h i s source for statistics r e l a t i n g to e m p l o y m e n t a n d earnings. Choice of the Base Year The choice of the year 1939 as the base year has been f u r t h e r g u i ded by t w o other considerations, viz. (1) Representativeness: the year 1939 in I n d i a m a y be considered to be f a i r l y represent a t i v e of the period i m m e d i a tely preceding W o r l d War II. (2) I n d i a ' s F i r s t F i v e Year P l a n w h i c h came i n t o operation in 1951 aims at restoration of 1939 l i v i n g standards in the c o u n t r y a n d i t was f e l t t h a t a study of r e a l wages o f i n d u s t r i a l w o r k e r s f o r the period 1939-50 on base 1939 m a y serve t o indicate w h a t the s t a n d a r d o f l i f e o f w o r k i n g classes was w h e n the P l a n came I n t o operation So that t h e economic effects of

the i m p l e m e n t a t i o n of the P l a n could be assessed properly. Scope of Wage D a t a The P a y m e n t of Wages A c t 1936, was passed on the recommendation of the R o y a l Commission on L a b o u r i n I n d i a — W h i t l e y Commission—and p r i o r to its enactment, there was n o l a w i n I n d i a r e g u l a t i n g wage payments to i n d u s t r i a l workers. The A c t covers a l l persons employed in factories a n d r a i l w a y s whose wages and salaries do not exceed Rs 200 per m o n t h . ' Under Section 2 ( v i ) of the A c t , the t e r m "Wages" is defined as f o l l o w s : " A l l r e m u n e r a t i o n capable of being expressed in terms of money w h i c h would, if the terms of the contract of employment, expressed or implied, were fulfilled, be payable, whether c o n d i t i o n a l l y upon the regular attendance, good w o r k or conduct or other behaviour of the person employed, or otherwise, to a person employed in respect of his employment or of w o r k done in such employment, a n d includes any bonus or other a d d i t i o n a l remuner a t i o n of the nature aforesaid w h i c h w o u l d be so payable a n d any sum payable to such person by reason of the t e r m i n a t i o n of his employm e n t but does n o t include: (a) the value of any house accommodation, supply of l i g h t , water, medical attendance or other amenities or of any service excluded by general or special order of the Governor General in Council or P r o v i n c i a l Government; A n amendment t o raise this l i m i t is under the consideration of the G o v e r n m e n t o f I n d i a . 157

(b) a n y c o n t r i b u t i o n paid by the employer to any pension f u n d or provident, fund; (c) a n y t r a v e l l i n g allowance or the value of a n y t r a v e l l i n g concession; (d) a n y sum paid to the person employed to defray special expenses entitled on h i m by the nature of his employment; or (e) any g r a t u i t y payable on discharge". P a r t ' B ' a n d ' C ' States In J a n u a r y 1948, the provisions of this Act, except sub-section 4 of Section 8, were made applicable to a l l classes of persons employed in coal mines. The A c t has also been extended v e r y recently to P a r t ' B ' and ' C States i n I n d i a but o w i n g to the n o n - a v a i l a b i l i t y of comparable d a t a for these States for earlier years up to 1939, the present study is confined to P a r t ' A ' States w h i c h , however, account for the m a j o r p a r t of the industrialised sector in the country. I n collecting the wages d a t a f r o m the P a y m e n t of Wages A c t Reports, it was f o u n d t h a t the figure relati n g to t o t a l wages paid to w o r k e r s t o o k account of the deductions m e n tioned above a n d it was, therefore, n o t necessary to m a k e any f u r t h e r allowance f o r such deductions in the published f i g u r e s . I t was o n l y in the case of M a d r a s State Reports t h a t wages p a i d to w o r k e r s in cash a n d i n k i n d were separately shown a n d the l a t t e r have been d u l y t a k e n i n t o account i n c a l c u l a t i n g the average earnings of the w o r k e r s in t h i s State. T h e d a t a pertains t o factories covered under Section,

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2 m ( i ) * , 2 m ( i i ) * a n d Section 85* of the Factories Act a n d wherever possible, the figure of t o t a l employm e n t a n d wages has been a r r i v e d at by t o t a l l i n g the figures for a l l these categories of factories.@

Choice of Method The c o m p u t a t i o n of real wage indices raised m a n y questions i n v o l v i n g a choice between various s t a t i s t i c a l techniques. I n calculati n g the real wage indices f o r p a r t i cular industries, the question w h i c h especially arose at the very outset was: Does such a real wage index have a n y significant meaning, especially when the industries are scattered i n d i s t a n t parts o f the c o u n t r y ? T h i s is indeed a difficult question to answer a n d one w h i c h is of p a r t i c u l a r relevance in a vast c o u n t r y l i k e I n d i a . ' E v e n i f one does decide to calculate such indust r y - w i s e indices f o r the c o u n t r y as a whole the f o l l o w i n g questions i m m e d i a t e l y arise: On w h a t basis are the regional indices to be combined? Further, what are the weights to be used? S i m i l a r l y , w h i c h cost of l i v i n g index is to be

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used as the deflator the or the A l l - l n d i a index? Various methods were available:

regional clearly

(1) To calculate real wage i n d i ces f o r the various industries on the basis of a certain pre-determined degree of localisation a n d then to take these as representative f o r the i n d u s t r y in the whole country. But, after some consideration a n d consultation@, it was t h o u g h t best to abandon this approach in view of b o t h the arbitrariness a t t a c h i n g to i t a n d the n o n - a v a i l a b i l i t y o f reliable data. (2) It was also possible to a r r i v e at a real wage index f o r the whole i n d u s t r y by first a v e r a g i n g the money earnings over States, using employment weights, a n d deflating the r e s u l t i n g weighted money wage index by an a l l - I n d i a cost of l i v i n g index computed by c o m b i n i n g the separate regional cost of l i v i n g indices i n t o a weighted average— the respective population figures being the weights employed. T h i s m e t h o d was also rejected as it was felt t h a t it w o u l d be subject to a considerable m a r g i n of error, o w i n g m a i n l y t o the errors involved in c o m p u t i n g an a l l - I n d i a cost of l i v i n g index f r o m the regional indices.

*Section 2 m ( i ) of the I n d i a n Factories A c t 1948 applies to a l l indust r i a l establishments where a m a n u f a c t u r i n g process is c a r r i e d on w i t h THE METHOD USED the a i d of power a n d where 10 or m o r e persons are employed, w h i l e ( A ) Real Wages o f F a c t o r y Section 2 m ( i i ) applies to such estaWorkers blishments e m p l o y i n g 20 or more To calculate real wage indices persons a n d not using power. Facfor a p a r t i c u l a r i n d u s t r i a l group tories covered by Section 85 are in each State f r o m the respective those " n o t i f i e d " by the State Govearnings a n d cost of l i v i n g data ernment to which the provisions a n d combine a l l these different of the A c t are extended by a special i n d u s t r y indices i n t o a weighted notification. average real wage index f o r the @ T h e l i m i t a t i o n s of the P a y m e n t whole industry, the weights being of Wages A c t d a t a are discussed the respective number of w o r k e r s in a later section. employed. A v a r i a n t of this m e t h o d * T h e p o i n t is one on w h i c h opi- w o u l d be to compute real wage i n n i o n seems to be divided. Professor dices f o r each group of industries D u n l o p in a letter to the a u t h o r in every State a n d to average t h e m w r o t e : " I am, however, somewhat out, u s i n g employment weights, to d o u b t f u l about the m e a n i n g of real o b t a i n a real wage series f o r the wage r a t e indices for p a r t i c u l a r whole State, a n d to average these industries w h e n these industries are State-wise indices, using t o t a l State to o b t a i n no doubt scattered in a v a r i e t y of employment as weights, localities". On the other hand, the an a l l - I n d i a index of real wages f o r Chief S t a t i s t i c i a n o f the I L O w h o m a n u f a c t u r i n g as a whole. T h i s Is was consulted on t h i s point, w r o t e : @ Professor P a u l H Douglas in a " W i t h respect t o n a t i o n a l i n d u s t r y or general indices, I w o u l d say t h a t letter w r o t e : "The v a l i d i t y o f t h i s the criticisms relating to heavy m e t h o d w o u l d depend on y o u r high concentration. local concentration of given indus- s t a n d a r d o f tries can be m e t by a p p l y i n g ap- Off hand, it w o u l d seem t h a t t h i s propriate e m p l o y m e n t weights t o m i g h t be used as first a p p r o x i m a the v a r i o u s wage series. I n a n y t i o n I n some industries, b u t t h a t were very event, there is c e r t a i n l y no objec- unless a l l industries t i o n to a n a t i o n - w i d e average wage h i g h l y concentrated y o u w o u l d r u n i n t o problems." o r r e a l -wage i n d e x per s o 153

the m e t h o d adopted in the present, work. F r o m the figure r e l a t i n g to the t o t a l a n n u a l wages paid a n d the average daily number of w o r k e r s employed, average annual earnings per w o r k e r for each group of indust r y in such State were first computed. Index numbers of money wages were next calculated on base 1939. These indices were deflated by the respective State w o r k i n g class cost of l i v i n g indices to yield the index, numbers of real wages w h i c h were finally converted on base year 1939 100. The cost of l i v i n g statistics consisted of m o n t h l y indices on base A u g u s t 1939- 100, pertaining to a number of u r b a n centres in each State eg, G a u h a t i a n d Silchar in A s s a m State, Bombay, A h m e d a bad, Sholapur a n d Jalgaon in B o m bay State, a n d so on. These m o n t h l y indices were first averaged i n t o annual indices and recast on base year 1939 100. These centrewise a n n u a l indices were averaged f o r the State as a whole, w i t h the respective centre-wise populations as weights. The indices thus a r r i ved at were used to deflate the money wage indices in order to a r r i v e at State-wise series of real wages f o r each b r o a d industrial group in the State. These groupwise real wage series in the State were next averaged out using the employment in the group as w e i g h t s to a r r i v e at a real wage series f o r the State as a whole f r o m 1939 to 1950. These whole-State real wage series were finally averaged out over a l l the States u s i n g the t o t a l employment i n a l l the industrial groups under the Payment of Wages A c t w i t h i n the State as weights, to a r r i v e at a real wage series f o r I n d i a as a whole f r o m 1939 to 1950.

(B) Real Wages of Workers in Mines I n certain p a r t ' A ' States covered by the present analysis, it was f o u n d t h a t the mining industry constituted one of the major industries in the State. It was, therefore, decided to t a k e due account of the real wage trends of the w o r k e r s employed in mines so as to m a k e our real wage series more representative for the State as a whole. ( T h i s forms a study by itself a n d w i l l be published in a subsequent issue of this paper). On l o o k i n g at the real wage series set up by this method, it was felt t h a t w h i l e they i n d i c a t e d only regional variations o f real

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wages, t h e y d i d n o t give a n y idea o f the industry-wise p a t t e r n of changes in real wages in I n d i a . R e a l wage series f o r all-India I n d u s t r i a l groups were, therefore, calculated f r o m the money a n d real wage indices of the corresponding i n d i v i d u a l b r o a d i n d u s t r i a l groups in each State, u s i n g the respective State-group employment as weights.

Index numbers available f r o m 1939 have r a t h e r remote years as base, w h i l e the prevalent system of rationing and control in certain centres, combined w i t h the periodical n o n - a v a i l a b i l i t y of certain articles included in the index, robs t h e m of much of their significance as guides to actual changes in the cost of l i v i n g .

Limitations of the Study

No Correction for Unemployment

A t this p o i n t i t i s necessary t o d r a w a t t e n t i o n t o certain l i m i t a t i o n s of the present study, so as to a v o i d possible i n d i s c r i m i n a t e or unqualified use t h a t m a y be made either of the d a t a or of the conclusions. F i r s t l y , this study is based on a n n u a l per capita earnings, w h i c h introduces a certain l i m i t a t i o n o w i n g not only to inter-regional and i n t e r - i n d u s t r y differences in earnings, b u t also to differences in the m e t h o d o f wage payment. I t m a y b e emphasised f u r t h e r t h a t the study is in terms of index numbers i. e. r e l a t i v e a n d n o t absolute real wages as compared w i t h 1939, Secondly, the .study h a d to be restricted to those large and o r g a n i sed perennial industries registered under the I n d i a n Factories A c t . There was no a l t e r n a t i v e in view of the complete n o n - a v a i l a b i l i t y of employment a n d wage statistics r e g a r d i n g the s m a l l unregistered establishments n o t f a l l i n g under the Factories A c t . There is reason to believe t h a t the number of such establishments i n India is f a i r l y large. The first Report of the N a t i o n a l Income Committee (1951) appointed by the Government of I n d i a disclosed t h a t the c o n t r i b u t i o n of s m a l l enterprises to the d i s t r i b u t i o n of income d u r i n g 1948-49 was about five times as great as t h a t of large enterprises. To the extent, therefore, t h a t such establishments have been excluded, the study is incomplete. F u r t h e r , the study is confined to "perennial" industries only. Seasonal industries were left o u t because earnings in seasonal industries are not s t r i c t l y comparable. T h i s is because w o r k e r s employed in t h e m are generally drawn from surrounding agricultural regions a n d they do n o t depend f o r t h e i r l i v e l i h o o d e n t i r e l y upon their earnings in seasonal factories. T h i r d l y , the special features of the cost of l i v i n g index numbers in India introduce an element of u n c e r t a i n t y in the r e a l wage indices calculated f r o m t h e m . T o m e n t i o n a few, m o s t of the cost of l i v i n g

F o u r t h l y , the most i m p o r t a n t l i m i t a t i o n of the present study arises f r o m the absence of any correction f o r unemployment. A s stated earlier, this is a consideration of m u c h greater significance. A wage study w h i c h fails t o t a k e account of this f a c t o r m u c h be considered inadequate, if not misleading. T h i s p o i n t m a y be elaborated a l i t t l e further. The absence of correction for unemploym e n t invalidates results especially w h e n the object is to a r r i v e at the earnings of the w o r k i n g class as a whole. T h i s is p a r t i c u l a r l y i m p o r a n t in analysis of the f u n c t i o n a l dist r i b u t i o n of the net n a t i o n a l income a m o n g the different factors of production. I f , however, the study is confined to earnings of those w o r kers w h o are employed, the l i m i t a t i o n tends t o disappear. I t was, however, impossible to improve the present analysis by correcting the wage d a t a f o r unemployment because unemployment statistics are practically non-existent in India.* F i f t h l y , the analysis is e n t i r e l y confined to P a r t ' A ' States o n l y ; P a r t ' B ' a n d ' C States h a d t o b e excluded as wage statistics were n o t available f r o m 1939 onwards. The A c t came i n t o force in these States m u c h later. T h i s geographical l i m i t a t i o n does not, however, appear to be v e r y serious when one considers the fact that Part ' A ' States cover between t h e m a very large p a r t of the organised indust r i a l sector of the I n d i a n economy. S i x t h l y , a note of w a r n i n g must be sounded about the r e l i a b i l i t y of wage statistics p e r t a i n i n g to certain States. On e x a m i n i n g the employm e n t a n d wages data r e l a t i n g to some States, it was found t h a t in the case of m a n y industries there zero ' The last decennial Census concluded in I n d i a covers f o r the first t i m e unemployment in the populat i o n and it m a y be hoped t h a t comprehensive a n d reliable u n employment statistics w o u l d be available in years to come. 155

n o t o n l y numerous gaps from year to year, b u t some figures, showed such a b n o r m a l v a r i a t i o n s as to raise doubts about t h e i r r e l i a b i l i t y . The best t h i n g to do under these circumstances w o u l d have been to o m i t these states altogether but such a course w o u l d have l i m i t e d the analysis seriously in its applicability to the whole country There was, therefore, no other choice in the case of these States b u t to fill i n the gaps by interpolation. To the extent t h a t this h a d to be done, the final results have to be interpreted w i t h some reservation. Limitations of P a y m e n t o f Wages A c t D a t a F i n a l l y , the l i m i t a t i o n s inherent i n the P a y m e n t o f Wages A c t m a y be noted. It has already been mentioned t h a t the P a y m e n t of Wages A c t has somewhat restricted coverage in as m u c h as it applies only to persons d r a w i n g wages or salaries n o t exceeding Rs 200 per month. Besides the number of factories s u b m i t t i n g returns i n any p a r t i c u l a r year is generally less, and sometimes considerably less, t h a n the number of factories registered. However, in those cases in w h i c h the f a c t o r y had ceased operations b u t h a d continued on the F a c t o r y Register, t h i s m a y not introduce a serious error. The f a c t o r y o w n ers, either o w i n g to i l l i t e r a c y , ignorance or sometimes t h r o u g h sheer indifference, do not in some cases s u b m i t correct or i n t e r n a l l y consistent returns. F u r t h e r m o r e , w h i l e s u b m i t t i n g these returns, the fact o r y owners, do not always f o l l o w a u n i f o r m practice r e g a r d i n g such m a t t e r s as inclusion of the a m o u n t of bonus paid to workers, exclusion of supervisory staff etc. Except in the case of Madras, the wages p a i d i n k i n d are not shown separately nor is there a n y t h i n g in the reports to indicate t h a t proper account of such payments h a d been taken in the wage figures published in the Reports. A n o t h e r consideration w h i c h imposes some l i m i tations on the P a y m e n t of Wages A c t statistics relates to the p a r t i t i o n of the c o u n t r y and the merger of the o l d P r i n c e l y States w i t h the I n d i a n U n i o n in a n d after 1947. O w i n g to these p o l i t i c a l changes, c o m p a r a b i l i t y of these statistics after 1947 suffers. However, a l t e r n a t i v e calculaions showed that inclusion or exclusion of the Punjab does n o t m a k e any m a t e r i a l difference to the a l l - I n d i a indices of money wages a n d r e a l wages, t h o u g h i t makes

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some difference to the indices of e m p l o y m e n t . I n the case o f the merger of the P r i n c e l y States, separate figures f o r these States were n o t Available and it was, not possible therefore, to exclude the employm e n t a n d wages figures r e l a t i n g to the P r i n c e l y States f r o m our statistics. Such l i m i t a t i o n s of data are perhaps inveitable when it relates to such a vast c o u n t r y as I n d i a a n d some m a r g i n of error is only to be expected when the number of r e t u r n s to be h a n d l e d in the case of l a r g e r States l i k e B o m b a y a n d West B e n g a l is very great. ' A l l the above l i m i t a t i o n s should be properly borne in m i n d before accepting the present analysis as final.

Real Wages In India as a Whole The State-wise as w e l l as the i n dustry-wise series of employment, money wages and real wages a l o n g w i t h t h e i r t r e n d e l i m i n a t e d values are b r o u g h t together a n d presented in Table Nos. 1 a n d 2 respectively. ( I n c a l c u l a t i n g the a l l - I n d i a series of r e a l wages, the question of the nonc o m p a r a b i l i t y of the P u n j a b data presented some theoretical difficulty. To meet any possible objection to i n c l u d i n g , w i t h o u t the necessary adjustment, the Punjab indices, alternative r e a l wage indices f o r I n d i a as a whole excluding the Punjab were calculated a n d i t was f o u n d t h a t the exclusion or inclusion of the Punjab does not m a k e any difference to the a l l - I n d i a real wage series).

Striking Features The most s t r i k i n g feature of Table N o . 3 is t h a t by 1949, real wages o f i n d u s t r i a l w o r k e r s i n I n d i a as a whole j u s t managed to catch up w i t h a n d s l i g h t l y exceed their 1939 level, after h a v i n g been consistently below it ever since 1942. Between 1939 a n d 1941, the real wage index d i d not sink below its 1939 level a n d one may, therefore, b r o a d l y say that, i n the v e r y i n i t i a l p a r t o f the period, the w o r k i n g classes in I n d i a as a whole d i d n o t suffer any i n r o a d i n t o their pre-war s t a n d a r d of l i f e . The average level a r o u n d w h i c h the a l l - I n d i a real wages fluctuated t h r o u g h o u t the entire period Cell short of the 1939 level by nine points. Thus, on the whole, the gains in real wages made by w o r k e r s in some States were more t h a n offset by the losses suffered by w o r k e r s in other States w i t h the result t h a t the posit i o n by 1950 r e m a i n e d more or less on an even keel. The general pict u r e o f r e a l w a g e trends I n I n d i a

' T h i s has been calculated by t a k i n g a w e i g h t e d average of the various regional costs of l i v i n g series in each of the States covered, using the corresponding employment as weights. @ T h i s represents t o t a l employment in perennial factories under the P a y m e n t of Wages A c t 1936 in

the i n d u s t r i a l groups included for c a l c u l a t i n g the money and real wage indices presented in the t a b l e . It does not represent either the t o t a l employment i n I n d i a under the Factories A c t or t o t a l E m p l o y m e n t under the P a y m e n t of Wages A c t . These l a t t e r figures w i l l be s l i g h t l y higher.

as a whole appears to be one of a constant struggle on the part of the working classes to keep close to their o r i g i n a l position. For, a l t h o u g h the a l l - I n d i a real wage index slumped to a low level of 70 in 1943, thereafter, it rose by g r a d u a l steps r i g h t up to 1949, by w h i c h year, as noted above^ it j u s t managed to reach its goal. The r e l a t i v e l y s m a l l range of postw a r v a r i a t i o n s in the cost of l i v i n g when seen in the context of the g r a dual movement of post-war real wages towards their pre-war level, seems to point to the broad conclusion t h a t the relative i m p r o v e m e n t in the economic condition of the w o r k i n g classes in I n d i a as a whole has, in recent years, been achieved by a s i t u a t i o n c o m b i n i n g w i t h i n it price s t a b i l i t y a n d wage increase r a t h e r t h a n wage s t a b i l i t y and price decrease.

Contrary Movements of Profits and Wages

in 1948, real wages reached b o t h t h e i r peaks a n d troughs m u c h earlier. This means t h a t i n d u s t r y was at its highest phase of cyclical operat i o n in 1945 but there was not m u c h of a connection between the general i n d u s t r i a l prosperity in the c o u n t r y a n d an improvement in the economic condition of the w o r k i n g classes. A l t h o u g h the a l l - I n d i a index of indust r i a l profits reached its peak of UGO in 1948, yet the index^ in 1945, stood f a i r l y h i g h at 234, w h i c h was considerably more t h a n twice its 1939 level. F r o m the standpoint of the r e l a t i o n between the business cycle and cyclical v a r i a t i o n s of wages, this seems to be a rather curious result unless these real wage peaks a n d troughs have followed an earlier business cycle in I n d i a . O r d i n a r i l y , one should expect the peaks and troughs of real wages to f o l l o w those of the business cycle. The position m a y be made more clear f r o m Table N o . 4.

It m a y now be i n t e r e s t i n g to study the a l l - I n d i a real wage trends as g i v e n in Table N o . 3, in the context of those in the a l l - I n d i a indices of employment, money wages, indust r i a l production a n d i n d u s t r i a l prof i t s , given i n Table No. 4 . I t w i l l be seen f r o m t h i s Table t h a t w h i l e output a n d employment reached t h e i r peaks in 1954 a n d i n d u s t r i a l profits

Table N o . 4 shows t h a t d u r i n g the six years t h a t production rose, real wages rose w i t h it in four years and f e l l i n the other t w o . I n the four years d u r i n g w h i c h the production index f e l l , real wages f e l l in t w o years a n d rose in the other t w o . T h i s means t h a t out of the eleven years, output a n d real wages were positively associated w i t h each other

159

January, 1957 In six years b u t negatively in f o u r years. L e t us also look at the relat i o n between real wages and indust r i a l profits. D u r i n g the six years t h a t profits rose, real wages rose w i t h t h e m i n t w o years a n d f e l l i n the other four w h i l e d u r i n g the five years t h a t profits f e l l , real wages rose in a l l the five years. It is t h i s confusing association between real wages on the one h a n d and indust r i a l output and profits on the other w h i c h p r i m a facie suggests t h a t i n d u s t r i a l prosperity a n d an i m p r o v e ment in the economic l o t of the w o r k e r s i n I n d i a did not g o h a n d i n hand. In the years 1941 a n d 1943, i n d u s t r i a l production rose by 8 and 6 points respectively but real wages f e l l by 6 a n d 22 points respectively. S i m i l a r l y , between 1944 a n d 1946, i n d u s t r i a l profits declined by 10 points but real wages recorded a rise of 4 points. I m m e d i a t e l y after the close of the w a r in 1946, we have a strange situation in w h i c h indust r i a l employment, output and profits a l l dropped noticeably b u t real wages rose noticeably. The rise in indust r i a l profits was quite rapid, espec i a l l y between 1939 and 1943, as w i l l be seen f r o m the fact that, by 1943, the profits index stood above its 1939 level by as m u c h as 145 points. Real' wages, on the other hand, det e r i o r a t e d progressively d u r i n g this very period. W h i l e profits reached a near-peak level in 1943, real wages of w o r k e r s reached t h e i r t r o u g h in the same year.

Output Above and Wages Below 1939 Level A closer look at the series of production, profits a n d real wages reveals a very interesting fact. W h i l e i n d u s t r i a l output a n d p r o f i t s were consistently above the 1939 level t h r o u g h o u t the entire period except o n l y in 1947, real wages of w o r k e r s were below the 1939 level almost t h r o u g h o u t the whole period. These trends suggest the b r o a d conclusion t h a t , between 1939 and 1950, prosp e r i t y i n I n d i a n i n d u s t r y did not a t a l l reflect itself i n any tangible i m provement in the standard of l i f e of the w o r k e r s but o n l y in offering t h e m more employment. T h i s raises t h e question: Was the i n d u s t r y responsible f o r this paradoxical deterior a t i o n in the economic condition of the w o r k e r s ? I n other words, d i d the I n d i a n entrepreneur increase t h i s output a n d profits by p a y i n g relat i v e l y l o w wages to his w o r k e r s ? The movement of the a l l - I n d i a m o n e y wage index suggests t h a t , as compared w i t h 1939, I n d i a n I n d u s t r y between 1939 a n d 1950, w a s p a y i n g i n -

THE ECONOMIC W E E K L Y

creasingly higher a n d h i g h e r money wages f r o m year to year. The money wage index, it w i l l be noticed, d i d not recede even in a single year d u r i n g the twelve years f r o m 1939 to 1950. I n other words, the w o r k i n g classes i n I n d i a were able t o s t r i k e bargains w i t h t h e i r employers f o r r e l a t i v e l y higher a n d higher money wages especially f r o m 1947 o n w a r d , but were powerless to adjust t h e i r real wages b y such bargains i n v i e w o f the tremendous rise in the cost of l i v i n g . A closer look at the relative rise in the index numbers of profits a n d money wages w i l l serve to emphasise t h a t , t h o u g h money wages rose continuously, the rise was m u c h less t h a n t h e rise in profits for a m a j o r p a r t of the period f r o m 1939 to 1950. I t w i l l be seen t h a t between 1939 a n d 1946 the money wage index was consistently f a r below the profits index, the highest gap of 89 points h a v i n g been recorded in 1942. A f t e r 1942 the gap between the t w o series was progressively narrowed d o w n , thus h e l p i n g the w o r k e r s to i m p r o v e t h e i r real wage position but i t was o n l y f r o m 1947 o n w a r d s t h a t the money wage index overshot the profits index a n d by 1950 enabled the w o r k e r s to regain t h e i r 1939 level of real wages. T h i s clearly points to the conclusion t h a t the deteriorat i o n in the real wages of the I n d i a n w o r k i n g classes d u r i n g the m a j o r p a r t of the period under i n v e s t i g a t i o n was the combined result of t w o factors, viz the f a i l u r e of earnings of labour to keep pace w i t h the steep rise in the w o r k i n g class cost of l i v i n g on the one h a n d a n d the chronic gap upto 1947 between the earn160

ANNUAL.

ings of labour a n d the profits of i n d u s t r y on the other. A Summary The broad conclusions w h i c h emerge f r o m the above study are as follows : (1) Real wages of f a c t o r y w o r k e r s in I n d i a between 1939 a n d 1950, after an i n i t i a l rise, remained below t h e i r pre-war level p r a c t i c a l l y t h r o u g h o u t the period. (2) It was o n l y t o w a r d s the end of the period, namely, by 1949 and' 1950 t h a t they managed to regain the 1939 level. (3) The average level a r o u n d w h i c h real wages o f f a c t o r y w o r k e r s in I n d i a as a whole fluctuated t h r o u g h o u t the entire period fell short of the 1939 level by 9 points. I t was o n l y after 1947 t h a t there was a persistent t r e n d f o r b o t h money wages and real wages to rise steadily a n d t h a t the i m p r o v e m e n t i n this s t a n d a r d o f l i f e o f the w o r k ers after independence was achieved by price s t a b i l i t y a n d wage increase r a t h e r t h a n wage s t a b i l i t y and price decrease, (4) There was no direct associat i o n between the trends of real wages on the one h a n d a n d those of i n d u s t r i a l output a n d profits on the other, so t h a t one can say b r o a d l y t h a t , between 1939 a n d 1950, i n d u s t r i a l prosperity a n d a n i m p r o v e m e n t in the economic conditions of the w o r k e r s i n I n d i a d i d n o t prob a b l y quite go h a n d in h a n d . On the other hand ( real wages of w o r k ers reached t h e i r lowest level In 1943 w h e n profits were at t h e i r nearpeak level.