Labour Economics III PDF

016 - LABOUR ECONOMICS UNIT: I- Introduction: Labour as a factor of production- types and characteristics – features of labours – Rural Vs Urban, Agricultural Vs Industrial, Organised Vs Unorganised- Labour Economics: Definition- elements- scope. UNIT: II-Labour and industrialisation:...

016 - LABOUR ECONOMICS UNIT: I- Introduction: Labour as a factor of production- types and characteristics – features of labours – Rural Vs Urban, Agricultural Vs Industrial, Organised Vs Unorganised- Labour Economics: Definition- elements- scope. UNIT: II-Labour and industrialisation: Need and features of industrialisation- Unity and Diversity- Economic characteristics and labour problems of industrialised society- Industrial work rule- Migration- types, causes, effects – Labour turnover and absenteeism: Meaning, Methods of measurement, Determining factors, Suggestions for improvement – Labour efficiency: determining factors, causes for low efficiency, suggestions for improvement. UNIT: III- Labour market: Meaning – functions – features – Dualism in labour market- Demand – Supply analysis – Supply of labour: Factors determining supply- Work participation Rate- factors determining supply of labour – Demand for labour – Short run Vs Long Run- Wage and employment under competitive equilibrium – Exploitation: Differences in wage and standardisation – Diversification in wage system – Factors affecting wages differences – Characteristics of a good wage. UNIT: IV- Trade unions Trade Union, collective bargaining and Industrial relations: Meaning- Theories of labour movement – origins features – trade union in India – Structure, Strengths, Weakness, Suggestions for improvement, Collective bargaining – Features, Importance‗s, forms – Hindrances- Industrial relations – Industrial disputes – types and causes – Impact – Preventive and Curative measures – Workers participation in management: Objective – arguments for and against – Workers education – Industrial discipline – Objectives – Causes for indiscipline – Suggestions. UNIT: V- LABOUR WELFARE AND LABOUR SECURITY: Definition- Approaches t labour welfare – Objectives- Theories – Need – Industrial health – Industrial Safety – Working conditions – Regulation of working hours – Workmen compensation – Maternity benefit – Provident Fund - Bonus – Gratuity protection of the aged and unemployed – Job security. REFERENCES: 1. Sharma. A.K., ―Labour Economics‖, Anmol Publications Pvt Ltd, New Delhi. 2. Sexana. R.C., ―Labour problems and Social welfare – K.Nath and Co, Meerut. 3. Thyagi. D.P., ―Labour problems and social welfare.  1 UNIT I INTRODUCTION MEANING OF LABOUR Labour is the act of mental and physical activity on some work for some monetary benefits. Any work or services rendered by the professionals such as doctors, engineers, teachers etc are all included in the labour. Alternatively, any activity done with the intention of happiness or pleasure or doing any art work for hobby will not count in labour. Otherwise, if the art work is sold out for some consideration, then the same will be called as labour. S.E.Thomas defines as "Labour connotes all human efforts of body or mid which are undertaken in the expectation of reward." In economics, labour (or labour) is a measure of the work done by human beings. It is conventionally contrasted with such other factors of production as land and capital. There are theories which have created a concept called human capital (referring to the skills that workers possess, not necessarily their actual work), although there are also counter posing macro-economic system theories that think human capital is a contradiction in terms. LABOUR AS FACTOR OF PRODUCTION Human efforts done mentally or physically with the aim of earning income is known as labour. Thus, labour is a physical or mental effort of human being in the process of production. The compensation given to labourers in return for their productive work is called wages (or compensation of employees). Land is a passive factor whereas labour is an active factor of production. Actually, it is labour which in cooperation with land makes production possible. Land and labour are also known as primary factors of production as their supplies are determined more or less outside the economic system itself. Capital: All man-made goods which are used for further production of wealth are included in capital. Thus, it is man-made material source of production. Alternatively, all man-made aids to production, which are not consumed/or their own sake, are termed as capital. It is the produced means of production. Examples are—machines, tools, buildings, roads, bridges, raw material, trucks, factories, etc. An increase in the capital of an economy means an increase in the productive capacity of the economy. Logically and chronologically, capital is derived from land and labour and has therefore, been named as Stored-Up labour.  2 Entrepreneur: An entrepreneur is a person who organises the other factors and undertakes the risks and uncertainties involved in the production. He hires the other three factors, brings them together, organises and coordinates them so as to earn maximum profit. For example, Mr. X who takes the risk of manufacturing television sets will be called an entrepreneur. An entrepreneur acts as a boss and decides how the business shall run. He decides in what proportion factors should be combined. What and where he will produce and by what method. He is loosely identified with the owner, speculator, innovator or inventor and organiser of the business. Thus, entrepreneur ship is a trait or quality owned by the entrepreneur. Some economists are of the opinion that basically there are only two factors of production—land and labour. Land they say is appropriated from gifts of nature by human labour and entrepreneur is only a special variety of labour. Land and labour are, therefore, primary factors whereas capital and entrepreneur are secondary factors. TYPES OF LABOUR  Human capital  Housework  Manual labour  Slavery  Unfree labour  Volunteer  Wage slavery  Wage labour CHARACTERISTICS OF LABOUR Labour has some characteristic features. They are: 1. Labour is Perishable - Labour is highly perishable than the other factors of production. They cannot be warehoused. They cannot be postponed or accumulated for the next day. Once the time is lost it is lost forever. 2. Labour cannot be isolated from the labourer - Any other factors of production can be separated but not labour from labourers. Labour and labourers are indispensable for each other. For instance, it is not possible to bring the ability of a teacher to teach in the school, leaving the teacher at home.  3 3. Less mobility of labour - when compared to capital and other goods, labour is less mobile. Capital can be mobilised from one place to another and labour cannot be transported from one place to another easily. A labourer may not be ready to go off places leaving his native place. 4. Work bargaining power of labour - It means, the ability of buyer to purchase articles at least price and that of seller to a higher price is called work bargaining power. A labourer sells his labour for wages and the employer buys by compensating money. Mostly labourers have poor bargaining power since they are weak and poor whereas employers are comparatively having high bargaining power for hiring labourers. 5. Inelastic supply of labour - In any particular time period, the elasticity of supply is inelastic in any nation. It means their supply can neither be raised nor subsided. They cannot be made to order like other goods. 6. Labourer is a human being and not a machine - Each and every labourer has his own likes and dislikes. They should not be hurt for they have feelings. Also they cannot work 24 hours a day and 365 days a year. We cannot become owner for a labourer is the actual sense. 7. Increase in wages may reduce the supply of labour - In the event if the wages are high, the whole family members are to work for their living. On the other hand if the wages are high, then only one family member may work and hence the supply reduces. 8. Difficult to find out the cost of production of labour - It is difficult to ascertain the cost of labour done by a labourer since it is based on his efficiency, experience, human morale. Also if the labour is a professional, it is not easy to ascertain his cost of production such as clothing, education, food etc. 9. Labour creates capital - Capital which is considered as a separate factor of production, is in reality is the result of reward for labour. He earns property out of production. Therefore, capital is formulated and accumulated by labour. It is evident that labour is more important in the process of production than the capital since capital is the outcome of the labourers' labour RURAL VS URBAN LABOURS India is a land of villages as around two-third of the total labour force in the country lives in rural areas. Wage paid employment is the main source of their livelihood. It has been the endeavour of the Government of India to alleviate poverty, particularly in the rural areas,  4 by formulating and implementing various target oriented anti-poverty rural development programmes. The IMF reports that 63 percent of the world‘s impoverished live in rural areas. Education, health care and sanitation are all lacking in rural environments. This causes many of the rural poor to move to cities, which often leads to a rise in urban poverty. The ILO Rural Labour Statistics Collection on ILOSTAT, which includes indicators for women and men in rural areas, helps to describe and understand the types of work performed in both farm and non-farm jobs and their rural labour-related characteristics. In 2010 the Department of statistics , which is responsible to compile and disseminate the full range of labour statistics produced in ILO member States, began an examination of international repositories of official labour statistics covering rural and urban areas, for the availability of data and definitions. As a result of this ILO Rural Initiative and more extensive data collection under the ILO‘s area of critical importance (ACI) on the promotion of decent work in the rural economy, the statistical activities completed to date are:  In-depth inventory of current definitions of rural/urban used at the national level  List of best practices used by international organizations in defining rural/urban areas  Review of best practice methodologies for imputing & harmonising data in cross- country datasets  Proposed methodology for obtaining global/regional employment, unemployment and labour force estimates by rural/urban breakdowns (NOTE: Given findings regarding important differences in definitions of rural/urban across countries, ILO does not intend to implement the methodology at this time.)  A set of statistical variables and key decent work indicators disaggregated by rural/urban (and other dimensions to the extent possible, such as gender and/or age) for over 100 countries. Documented rural labour statistics are a requisite tool to support national development plans to ensure that economies (both developing and industrialised) progress in a sound, more geographically balanced manner. Beyond the agricultural sector, rural labour statistics cover more than the conventional presentation by sector of economic activity, which distinguishes agricultural activities from other activities. The agricultural sector has long served as an approximation for rural labour. However, labour statistics that cover all types of work activities, including agriculture, according to their urban or rural location better help to assess the full contribution of rural areas and rural workers to national development. They also better reflect the rural dimensions needed for decent  5 work, and can lead to improving rural labour markets and the lives of rural workers. Some challenges for producing rural labour statistics that have emerged regard the need to define the concept of ―rural‖ for statistical purposes. This is to ensure that countries collect relevant data, and that rural labour statistics become mainstreamed and comparable. The ACI on the promotion of decent work in the rural economy aims at providing decent work for all towards sustainable, inclusive and thriving rural economies. Rural Decent Work, helping to ensure the spread of Decent Work to rural areas and rural workers, relies on rural labour statistics compiled, produced and analysed regularly. These will help develop the capacity of constituents and other stakeholders to promote full and productive employment and decent work that fosters sustainability and inclusiveness in rural economies and empower rural communities to realize their aspirations. These statistics provide a better foundation to design, implement, monitor and assess rural development programmes - as an integral part of national development plans. Developing and disseminating rural statistics is a necessary step towards a comprehensive ―stocktaking of the nature, magnitude and changing patterns of rural employment in the world, with a particular focus on developing countries‖ as called for by ILO member States and reflected in the ILO's Rural Employment and Decent Work Programme. Develop and build capacity for labour force surveys to disaggregate by rural- urban, through the Department of Statistics‘ technical cooperation and training activities. This will assist countries to enhance their capacity to collect relevant rural and urban labour statistics that account for all of the rural specificities to support the development, implementation, monitoring and evaluation of national policies and programmes for rural development. Carry on developmental research to define ―rural area‖ for statistical measurement purposes. The different criteria used to classify areas as rural or urban may be based on population, on infrastructural characteristics or other variables. Also, capacity building for a multi-facetted development goes beyond monitoring the concept of rural employment, to monitoring all rural work. The concept of total work includes the production carried out as unpaid household service work and as volunteer work inside the General Boundary of the System of National Accounts, beyond the economic activities measured by the concept of employment. The ILO Rural Labour Statistics Collection covers over 100 countries and can be accessed through the ILOSTAT Database , with the following indicators available:  6 In the section "Yearly indicators" (indicators now collected on a yearly basis by the Department of Statistics)  Working-age population  Labour force and labour force participation rate  Employment and employment-to-population ratio  Unemployment and unemployment rate In section "Special collections" (indicators collected on a one-time or irregular basis)  Estimates and projections of the total population  Poverty gap at national poverty line and at rural poverty line  Poverty headcount ratio at national poverty line and rural poverty headcount ratio at rural poverty line  Share of active contributors to an old age contributory scheme (% of employment)  Share of population above statutory pensionable age receiving a contributory old age pension  Average weekly hours actually worked per employed person  Average hourly earnings of employees The metadata is disseminated alongside the data to indicate the data source, coverage and definitions, including the criteria used to define rural/urban areas. Statistics were harvested from National Statistical Offices' website as well as international repositories. As per the NSSO surveys (61st round and 66th round), nominal wage rates of skilled workers in both rural and urban areas increased much faster in the second half of the 2000s than in the first half. While the real wage rates declined in the first half, it increased significantly in the second half of 2000s.  7 AGRICULTURAL LABOURS Agricultural Labour in India Ranjan Kumar Som In a developing economy the change in the pattern of employment indicated by a fall in the number at agricultural labourers and labour households should be welcome unless the erstwhile agricultural labourers shifted to less productive jobs or were rendered unemployed. It is possible that among agricultural labourers those who were comparatively better off readily took the opportunity to shift to better occupations. But the supply of agricultural labour being still far in excess of demand, the wage rate failed to rise as a result of the reduction in the total number of agricultural labourers, This is, of course, a hypothesis but some indirect evidence in support of it is found in the fact that the number of land-holding agricultural labour households fell, while that of non-landholding households increased. Further, increase in the number (and proportion) of child labourers, the decrease in the extent of self-employ ment and the comparatively higher net income of the non-landholding households all this may be construed to confirm the assumption that the comparatively better off among agricultural labourers have shifted to other occupations. Agricultural labour constitutes, numerically, the most important single clement among the gainfully employed population in India. It is also the poorest. The first Agricultural Labour Enquiry was conducted by the Ministry of Labour in 1950-51 to probe the economic condition of agricultural labourers. The second Enquiry was conducted in 1956-57 by the Ministry, through the agency of the National Sample Survey in the nt h and 12th rounds (August 1956-August 1957 A Working Party consisting of representatives of the Ministry of Labour and Employment, the National Sample Survey Directorate, the Central Statistical Organisation, and the Indian Statistical Institute was responsible for planning the survey. It  8 made some improvements in methodology of the survey, including the sample design. The concepts and definitions were pretested in the course of a Try-out on Agricultural Labour Enquiry in AprilMay 1959 conducted in 24 sample villages spread over 15 (pre- reorganization) Slates. The definition of an agricultural labour household adopted for the second ALE was operationally different from and more convenient than that used in the first ALE. In the first ALE, a household in which either the head of the household or 50 per cent or more of earning members reported agricultural labour as the main occupation was deemed to constitute an agricultural labour household. In the second ALE, a household deriving 50 per cent or more of its income (after imputing the value of home-grown and self-consumed products) from agricultural labour was defined as an agricultural labour household. The Try- out on Agricultural Labour Enquiry revealed that the two definitions were co-terminus. Al l households which were classified as agricultural labour households according to the definition used for the second Enquiry also fell within the scope of the difinition used for the first Enquiry. The criterion of earnings to determine the occupation of the household was also adopted in the 1951 Census and later National Sample Survey rounds. The days of work spent in different types of activities — agricultural wage employment, non-agricultural wage employment, self-employment, unemployment and activities outside labour force — were recorded separately under suitable "intensity"-of-employment classification along with the normal length of a full working day and the normal hours of work for the activity in the locality. The days of work were calculated after assigning proper weightage to part- employment. In the event of a person having more than one activity during a day, the activity which occupied him the longest was deemed as the major activity and the other activities as minor activities. THE SAMPLE A two stage stratified sampling design was adopted in both the surveys, the villages being the first-stage unit and the sample agricultural labour households, the second-stage unit. The selection of the sample villages was done with equal probability in the first AL E and with probability proportional to the 1951 Census population in the second ALE. Within the selected villages, a number of sample households was chosen with equal probability in the first AL E and systematically with a random start in the second ALE, About 11,000 agricultural labour households in about 800 villages supplied information in the first ALE. The corresponding figures were about 21,000 households in about '4,700 villages in the second ALE. In the first ALE, the same set of households was to be visited every month for a period of 12 months and the annual data were to be built up from these monthly data. This led to difficulties since a number of households either left the village or were not available for interrogation during most months of the year. Consequently, the  9 "universe" with which the Survey began changed considerably by the end. Also, the non- sampling biases are likely to be more if such a procedure is adopted, in the second ALE, the sample households were uniformly spread over time and the monthly data collected were inflated proportionately to give annual estimates. In the first AL E the data were collected by an ad hoc staff. In the second AL E the task was entrusted to the regular staff of the NSS. The comparison made below of results of the two surveys assumes that the quality of data was similar in both surveys. This remains to be examined. The reliability of estimates was calculated in the first AL E by the usual method of "standard errot"; in the second ALE, although "standard error" were calculated for some items, the margin of error was calculated directly, and more cheaply, from the estimates for the four sub-samples into which the full sample was divided. The probability that the "true" value would lie between the minimum and maximum of the four values is 1-(½).3 or 7 in 8. The proportion of agricultural labour households, with and without land, to the total rural households in the two surveys is given in table 1. The number of households was calculated in the second ALE on basis of the projected population and the average household size for the same period, obtained from the NSS. While the number of rural households increased INDUSTRIAL LABOUR Meaning: It refers to all those workers, who are employed in manufacturing units, i.e., the workers employed in large scale, village & small scale industries are considered industrial labour in general sense.0 Characteristics: 1) Illiteracy: A large proportion of industrial workers in India are illiterates & ignorant. So they cannot understand the problems confronting the economy in general & industries in particular. They do not even understand their own problems. 2) Lack of Discipline: There is no discipline among the industrial labours in India Indiscipline, absenteeism without any reasons. Moving from one job to another etc, are very common. 3) Majority Characters: Industrial labour in India is migratory in character. Most of the laborers in industries are drawn from villages & are cages to return to their homes during their busy agricultural seasons. 4) Lack of Organisations: The industrial labour in India is not united, but is divided & sub – divided on the basis of language, region, caste, etc. They are unable to organize themselves. Consequent upon that most of the trade unions are controlled by outsiders.  10 5) Low Efficiency: The efficiency of industrial labour in India is very low. Their productivity is also very low. Lack of education, training, research medical facilities, etc, are reasons for low productivity. 6) Poverty: The industrial labours in India are very poor. Their salary, standard of living & productivity are very low. They are unable to generate interest in their work because of poverty. 7) Superstitions: Most of the industrial labour in India are superstitions & tradition – bound. They believe in fatalistic & Meta physical things. They have irrational outlook. 8) Large Scale Absenteeism: It is another important feature of industrial labour. They remain absent without any reason. 9) Ignorant of Roles & Regulations: A good proportion of our industrial workers are ignorant of rules & regulation. 10) Bad Habits: The industrial labourers in India are addicted to bad habits. They are involved in unhealthy practices. As a result, their efficiency & mental discipline are badly affected. ORGANIZED AND UNORGANIZED LABOR IN INDIA In India, a major chunk of labor force is employed in the unorganized sector. The unorganized / informal employment consists of causal and contributing family workers; self employed persons in un-organized sector and private households; and other employed in organized and unorganized enterprises that are not eligible either for paid, sick or annual leave or for any social security benefits given by the employer. According to the results of the National Sample Survey conducted in 1999-2000, total work force as on 1.1.2000 was of the order of 406 million. About 7 % of the total work force is employed in the formal or organized sector (all public sector establishments and all non- agricultural establishments in private sector with 10 or more workers) while remaining 93% work in the informal or unorganized sector. The NSS 55th round, 1999-2000 also covered non-agricultural enterprises in the informal sector in India. As per that survey, there were 44.35 million enterprises and 79.71 million workers employed thereof in the non-agricultural informal sector of the economy. Among these 25.01 million enterprises employing 39.74 million workers were in rural areas whereas 19.34 million enterprises with 39.97 million workers in the urban area. Among the workers engaged in the informal sector, 70.21 million are full time and 9.5 million part times. Percentage of female workers to the total workers is 20.2 percent.  11 The table below describes major employment trends for the organized and unorganized sector for the years 1983, 1987-88, 1993-94 and 1999-2000. It is evident that throughout this period a large portion of the workforce in India is found to be employed in the unorganized sector. Out of 397million workers in 1999-2000, it is estimated that 369 million workers (nearly 93 per cent) are employed in the unorganized segment of the economy whereas only 28 million workers (7 per cent) are engaged in the organized sector. The share of unorganized employment in the economy has displayed remarkable steadiness over the years. The share of informal employment has risen from 92 per cent (nearly 276 million out of 300 million) in 1983 to 93 per cent in the 1999-2000. It is clear that employment opportunity in the organized sector has remained more or less stagnant, showing only a marginal increase from 24 million in 1983 to 28 million in 1999-2000. The largest numbers of informal workers are in agriculture. In fact, 98.84 percent of the employment in agriculture is informal. In the non-agricultural sector, the highest numbers of informal employees are in retail trade, construction, land transport, textiles etc. Thus, the unorganized sector plays a vital role in terms of providing employment opportunity to a large segment of the working force in the country and contributes to the national product significantly. The contribution of the unorganized sector to the net domestic product and its share in the total NDP at current prices has been over 60%. In the matter of savings the share of household sector in the total gross domestic saving mainly unorganized sector is about three fourth. Thus unorganized sector has a crucial role in our economy in terms of employment and its contribution to the National Domestic Product, savings and capital formation.  12 LABOUR ECONOMICS INTRODUCTION: This unit has been prepared to acquaint you with the Conceptual aspects of labour economics, that is it meaning scope and importance in the Industrial sector in general, and in developing economics in particular. Labour economics is very important subject of recent origin. Economics development poses a challenge to the principal partners in the progress of the State, the employers and the worker. The basic aim of all these should be keep the Tempo of development. The inevitably calls for the degree of concerted efforts. How far such concerted efforts will be forth-coming depends upon the way of society choose to organise its development endeavour, and how the different partners feel committed to its success. Normally labour would be the weakest partner-though perhaps, it is the most important and the role it plays will be largely determined by how it react to the roles of the other too. Its common knowledge that the worker who are Underaged of the poorly housed or who carry worrics, woul be less efficient. Labour welfare is not a charity. Creating more satifying working condition and living condition for the men and women employed in the industry increase the sense of worker involvement in the objectives of the enterprise and motivates them to put forth their best in the interest of the development of the country welfare. If employee and efficient production of goods and services have been rightly regarded as among the social responsibilities of the industry and state. And that is the need of labour economics which studies the problems, solution and development of labour in the economy. Labour economics look out to recognize the dynamics and functions of the markets of labour. The labour market function is by the interaction and dealing of employers and workers. Labour economics tries to understand the result pattern of income, employment and wages by looking at the workers or employs and the employers. According to economics labour is the measurement of the work that is done by the human beings. Usually, there is dissimilarity in labour economics and other aspects of production such as capital and land. The concept of human capital is developed by some economic theories. Human capital refers to the skills that workers have, this is not necessary that this is their genuine work. There are some theories of macroeconomics system and according to these counter posing theories human capital has contradicted terms. In labour economics we study that how the labour services suppliers (workers) are distributed in the jobs and how their wages or rate of  13 payments decided and how their abilities of work affected by the other factors. Those who work and gain the capability are included in the labour force of the country as well as those who are unemployed and searching for the job or work. There are many factors manipulate how labour services suppliers (workers) are consumed and to what extent they are paid for their services. It also includes the qualities of labour force (workers) such as their level of education, their health, allocation of their skills and special trainings and the degree of mobility. Structural characteristics of economy are also included in it like heavy manufacturing proportions, service industries and technology. In addition institutional factors are included as well such as power and extent of association of employers and labour unions and the existence of the laws of minimum-wages. Miscellaneous factors are also considered which includes variations and customs in business cycle. Some specific general trends are extensively recognized by labour economists. For example, level of wages is tending to be elevated in jobs and it engages high risk, higher level of efficiency of labour like training or education is required in the industries, in the economies that are highly proportional by such industries and the industries that are highly unionized. Labour efficiency is the capability of labour to raise the output of products and goods without raising the labour force. If the labour force is efficient then the production level of goods and products will be increased. DEFINITION – LABOUR ECONOMICS Labour economics applies the tools of economics to explain labour market behavior. Study of economic behavior of employers and employees in response to changing prices, profits, wages, and working conditions. In particular, it aims to understand the factors that influence the demand for and supply of labour and their interactions. Labour economics, study of the labour force as an element in the process of production. The labour force comprises all those who work for gain, whether as employees, employers, or as self-employed, and it includes the unemployed who are seeking work. Labour economics involves the study of the factors affecting the efficiency of these workers, their deployment between different industries and occupations, and the determination of their pay. In developing models for the study of these factors, this section deals with the labour force of contemporary industrialized economies.  14 SCOPE OF LABOUR ECONOMICS The scope of labour economics covers those fields of state-activity where labour directly or indirectly involved. It is a systematic study of various theories concepts, hypothesis and steps relating to the labour class. Labour economics deal with various aspects such as labour organization, collective bargaining, wages and employment theory, man power economics. The workers are primarily concerned with security of employment upon which depends the well being of the entire working class. The employer, on the other hand, are mainly concerned with the problem of recruitment, training and retention of worker at the wage rates which may provide them sufficient profit while the public policy concerned with the early education of the work force, and the prevention of labour management conflict. Thus, labour economics deal with the specialized study of the areas in as elabourate below.  Sharma, A.K., ―Labour Economics‖, Anmol Publication Pvt Ltd, New Delhi.  Sexana, R.C. ―Labour Problems and Social Welfare – K. Nath and Co, Meerut.  Thyagi, D.P. ―Labour Problems and social software‖.  15 Unit II LABOUR AND INDUSTRIALISATION WHAT IS 'INDUSTRIALIZATION' Industrialization is the process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods. Individual manual labour is often replaced by mechanized mass production, and craftsmen are replaced by assembly lines. Characteristics of industrialization include economic growth, more efficient division of labour, and the use of technological innovation to solve problems as opposed to dependency on conditions outside human control. NEED AND FEATURES OF INDUSTRIALISATION Industrialization plays a significant role in the process of economic development. The examples of developed countries indicate that there is a direct relationship between high level of income and industrial development. Industries account for 37% of the gross domestic product in Japan, 32% in UK and 22% in the U.S. whereas it stands at 27% for India. Further a strong industrial base is required for generating gainful employment opportunities for the unemployed and under- employed labourers in the agricultural sectors. Industrialization also helps in overcoming trade gap. The less developed countries are generally primary producers and import industrial output. With industrialization of their own economy they need not import industrial product from outside and this helps in reducing the trade gap. Industrialization also helps in satisfying a variety of demands of the consumer's. With modernization of the economy the demand for industrial product has increased considerably. Industrialization brings a change in the socio-cultural environment of the economy. It makes people dynamic, hard-working, mobile, skillful, efficient, and punctual. It brings a change in the way-of life of the people and makes people more commercial. It also provides security to the economy by making it self-dependent. Thus industrialization in a nutshell acts as a catalyst in the smooth process of economic development. THE LABOUR PROBLEMS IN DEVELOPING ECONOMY AND THEIR SOLUTION The main problems can be discussed under the following heads: 1) Unemployment 2) Issue of wages 3) Long hours of work  16 4) Migration of labour 5) Absenteeism and labour turnover 6) Industrial accident and disease 7) Lack of homogeneity and solidarity amongst the worker 8) Poverty and lack of Education 9) Political exploitation 1) THE PROBLEM OF UNEMPLOYMENT In the modern times, the most pressing problem in a developing country is the unemployment i.e. the inability of person willing and able to work under reasonable circumstances to find suitable work which they are not getting. It is really loss to the nation as the unemployed do not do not contribute anything in building of the nation. The immediately effect of unemployment is obviously a reduce income, and as saving are usually insufficient to support the family for any length of time, the result is a fall in the standard of living. Thus, unemployment threatens great privation in food, clothing etc and causes misery not only to the man directly affected but also to his family. Therefore, an all round effort is needed to solve the problem of unemployment.Development of nation‘s resources with more investments, capital equipment, increase in the pace of industrialization both in large scale and small scale sectors, agriculture reorganization , a job oriented educational system , man power planning , checks on growth of population, sound monetary and fiscal policies etc, can be some of the remedies to tackle the problem of unemployment particularly in a country of developing economy. In this connection it is also suggested that labour exchange should be established to bring about equilibrium between demand and supply of labour and provide more regular work for the labourer and minimize the evils of casual labour. The public demand for labour can be increased by undertaking public work programs like construction of public buildings, railways, road, canals etc. This will not only give employment to those who are employed in such works but will stimulate private enterprise by creating demands for goods on the part of those workers. 2) ISSUE OF WAGES The wage problem is so important that it has always engaged the attention of all thoughtful people in all countries of developing economy. ―It cannot be denied that the wages from the pivot round which most labour problems revolve. Wages are the main cause of trouble in the industrial disputes. They are main source of the worker‘s income. His livelihood and that his family depend upon the wages he receives. This problem is more  17 complicated and compels in India because India is a example of an under developed economy and requires an early solution. Hence, the wage is of super most importance to the worker. The welfare and efficiency of the wage-earner depends upon the amount of earning received. More earning leads to or means greater satisfaction of wants. The importance of the wage problem also lies in the fact that innumerable wage rates and unscientific differential prevail in most of the factories, and there is a lack of plan in fixing differentials in between different wage rates. The problem of fixing a minimum wage for the work is also most essential at the present time when there is a tendency among the employers to exploit the workers. Therefore, a number of issue, as pointed out above, are thus, involved in determination a right wage policy e.g. the cost of living, size of family, capacity of industry to pay, productivity of labour etc. The problem has to tackle not only from the economic but social point of view also, as a means of reducing inequalities of income and wealth. Hence the problem of wages is one of the most important and complex problems and require immediate solution. 3) LONG HOURS OF WORK The healthy and efficiency of worker mostly depend on the number of hours they have to work. In case of long working hours the operative is bound to be tires and slack in his duties. The tiresomeness often becomes the cause of his shattered health, which ultimately tells upon his efficiency. Men are often found absent from their machines, and spare hands have to be employed to attend the machines of the idlers. Long hours not only cause physical exertion but also keep a worker away from home for a long time, and he cannot reasonable look after his household affairs and his family members and devote some time for his physical and mental recreation and social welfare. They lose their efficiency and interest in work. Therefore, it can be said that long hours work and tiring factory condition representing a marked contrast to the worker‘s native environment are other cause of inefficiency. The effect of long working hours on worker must viewed over a numbers of years. Conditions of modern industry impose a heavy strain on the workers and fewer hours helps to alleviate the burden. A man may work for a long time on a strenuous task for a dozen hours or more per-day, but his physic is liable to be so impaired that the length of his working life is less than that of a man whose hours are more reasonable. The long working days, multiplied by a short working life are less productive in the aggregate than short working days multiplied by longer working life. The prevention of undue fatigue always increases the  18 efficiency of the operatives, and the liability to accident and disease is diminished. The above steps are very important in a developing country where to increase the production is prime object of industry. A normal period of working hours, with a rest of interval would enable the worker to perform their duty more efficiently and happily. Hence, the question of reduction in the hours of work has always been an important question for industrial workers. THE PROBLEM OF MIGRATION OF LABOUR One of the characteristic features of the industrial worker in developing countries is that it has been mostly of a migratory character in the sense that the workers employed in most industries do not claim as their home town the place at which they work. While in the developed countries where industrialization has taken deep roots, there are big industrial centers which attract a permanent class of industrial workers, completely divorced frame land. In those countries the worker have no ties with the village of adjoining area, most of them have been brought up in the town and they depend upon their wages as the only mean of livelihood. But in developing countries most of the unskilled factory worker come from the adjoining villages and continue to keep contact with their village homes and this feature of workers create many problems. The worker lives and work under condition and circumstances which are new to his experience and completely variance with many things that he had to face previously. In the village , the worker is spasmodic with long intervals of leisure, while in the cities the worker find themselves caught within the great wall of the factory and are stupefied by the clang and whirl of machinery. They have to toil continuously for long hours and are subjected to strict disciplined which produces a heavy strain on their body as well as mind, causes them a serious distress and impairs their efficiency. The insanitary habits of villagers also prove far more dangerous to health of the worker in the congested town than in villages. The ill-health is further augmented by the fact that the vast majority of them have to leave their wives behind in the villages, and being deprived of the healthy pleasure of family life , they fall an easy victim to the temptation of prostitution, alcoholism and gambling that about in all industrial centers. All above factors tend specially at first to produce a state of depression and when as frequently happen, sickness supervenes and there are no proper provision for looking after the worker as such times, there is a strong inclination to return and endure the provision of the village rather than vase and hardships of the town. The efficiency of the worker also suffer because with the constant changing of the labour force and worker are not able to get full training. The efforts and the enterprise of the employers in training of the worker are lost when the workers goes back to the villages and often does not return. The migratory character has also got an adverse effect on industrial  19 organization and leads to unhealthy growth of trade union and do not like to pay their subscription because they do not come to the cities to live permanently. Therefore, above all factor of migration relating to the worker are very harmful to the developing countries, where a permanent force is needed in order to progress in industrial sector. Now the question is ―should efforts be directed towards building up an industrial population divorced from the villages or should be contact with the villages be maintained and stimulated. Here it is worthwhile to mention the suggestion given by labour investigation committee11. The labour investigation committee pointed out that stability of labour could be brought about by the improvement of working and living condition generally in the industries in which such worker were called upon to work. The committee quoted the opinion of the All India Trade Union Congress and many employers in this connection. All agree that a stabilized labour force is very desirable in the interest of industry, but the housing condition, wages, condition of work and living and welfare measures and other facilities must be improved before this migratory character can be checked. In the opinion of committee most workers in industrial town and landless labourer and they resort to the village occasionally for the purpose of rest and recreation, social ceremony etc. If that is so, it is obvious that from the worker‘s point of view there is no urgent necessity of going back to the villages as often as possible. There is nothing to suggest that the condition of employment, wages, housing etc. are any better in the villages than in the towns. It is of course and undeniable proposition that the villages and joint family has been a bulwark of social security for the industrial works. Hence, present circumstances and till the modern measure for social security, such as insurance against sickness, unemployment, disability etc. are adopted, the villages must be accepted as a source of comfort and security to the worker. But in my views, in order to have a permanent industrial population, as in the west , effort must be continued to provide healthy living and better employment conditions to the worker in industrial towns and for this the Govt. employers and Trade Union organization must take positive steps in the interest of industrial worker, in the form of housing finance and in organization of building industry, low income group housing scheme and the problems of slum and slum clearance improvement scheme. 5) ABSENTEEISM AND LABOUR TURNOVER ―The success of an organized industry largely depends upon the efficiency and experience of its worker. Hence, the extent to which it can reduce absenteeism and labour turnover of the worker is of great importance to the success of an industry.  20 The worker remain absent for various reason of which only some be genuine. Sickness is responsible for a considerable part of absenteeism at most place. The low vitality of the workers, combined with bad housing and insanitary, condition of living make them easy prey to many epidemics like cholera, small pox and malaria, which break out in industrial areas and force them to be absent from their work Hence, absenteeism is an evil for both the employers and the workers. It also reflects a reaction of the workers to industrial life and leads to serious introduction delay and increased cost. The above evil is generally find in the developing countries and therefore this problem require immediate solution. As regards measures to be adopted for absenteeism, the Bombay Textiles Labour Inquiry committee has perhaps given the best which the Labour Investigation Committee also agreed. The committee says that the proper condition of work in the factory, adequate wages, protection against accidents and sickness and facilities for obtaining leave for rest and recuperation constitute the most effective means of reducing absenteeism. Creating a sense of responsibility among the worker by proper education and organization and by making them partner in industry and management will also reduce absenteeism. Introduction of an incentive wage scheme and linking wages and bonus with production will also be helpful in checking absenteeism. LABOUR TURNOVER Similarly labour turnover is at once the cause and effect of instability of employment. Mostly, turnover is due to resignation and dismissals and a higher rate of turnover becomes harmful to the efficiency of the worker as well as the quality and the quantity of the production. It also affects their organization because it leads to less solidarity among the worker who moves frequently from mill to mill and from industry to industry. Therefore, labour turnover is a serious obstacle to complete utilization of country‘s human and material resources, although in a developing country in India, with a large number of unemployed and under employed labourers the national loss due to turnover may be of second order so far as full utilization of the resources is concerned. As pointed out, labour turnover is very undesirable because it leads to lower efficiency and diminished output for the industry. Hence measures have to be adopted for reducing the labour turnover. That implies a positive policy requiring concerted action. Improvement in the system of recruitment will reduce labour turnover. In order to solve this problem, measures should also be adopted to improve economic position of the workers and give them security of employment and other facilities in industrial town so that the worker may not go to the villages as frequently as they do now. ―The Badli control system, introduce  21 at certain place like Bombay, can also reduce labour turnover. Thus, as pointed out by the Bombay Textile Enquiry Committee, improvement in the method of recruitment is one of the principle remedies for excessive labour turnover and some radical and effective methods such as establishment of Employment Exchanges, restriction on the power of jobbers and proper organization of personnel department, are required. Improvement of working conditions, welfare activities, social insurance scheme, leave and holidays, better wages, worker‘s participation in management etc., will also make the labour force more stable than at present. Beside, the worker‘s organization should be ncouraged and improved which should lead to the stability of worker in industrial areas. LABOUR TURNOVER (a) Definition and Meaning : Labour Turnover may be defined as the time to time changes in the composition of the work force that result from the hiring, release and replacement of employees. In other words, it is a measure of the extent to which old employees leave and new employees enter the service of concern or a production unit. Thus, in its quantitative aspect labour turnover is rate of change in the working staff of a concern during a definite period which may differ from industry to industry. It is an index of separations, and accessions. In this sense here are two aspect of turnover, that is, the proportion of the workers who go out of employment and the proportion of workers who enter into employment in a specific period. In its sociological aspect labour turnover is understood to mean a process of socioeconomic impact which the employer and employee face in its reality. Some of these separation and accessions, of course, can‘t be regarded as an expression of employees, dissatisfaction with the job. Some employees are released on the initiative of the employer. Some turnover is the result of reduce demands for workers. A varying proportion of the total, however, represents voluntary separation or quits-which may be significant. Some quits may not indicate low morals; an employee may find it necessary to move for the reasons of health family plans or other extra professional reasons. The cumulative effect of labour turnover consequently attracts the attention of industrial managers and organizers. (b) Nature and Effects : Labour turnover in certain situations is unavoidable and within limits not desirable. But all labour turnover whether unavoidable or desirable are likely to attract the attention of managerial personnel and the organizers. The turnover rate differs industry to industry and organization to organization. Low levels of separations and accessions in the industry are desirable economically and psychologically. But high levels of separations and accessions  22 have greatest significance as indicators of employee‘s dissatisfaction. The factor which control them are an admixture of three items, the economic and financial conditions affecting the industry and the establishment, the quality and the social skill of the management and the varied attitudes, desires and purpose of the workers as human being. The study of turnover is helpful in manpower planning. Just as the high readi ng on a clinical thermometer is a sign to the physician that something is seriously wrong with the human organism, so is a high index of labour turnover rate a warning to management that something is seriously wrong with the health of organizations. But just as clinical thermometer merely indicates that something is wrong cut not what is wrong so does the turnover rate merely warns and does not diagnose. A high temperature may mean pneumonia, measles or mumps. A high turnover rate may mean poor personnel management, poor supervisory practices, can also be dangerous signal Further-to-note, labour turnover involves cost not only in human values but also money. These include: (a) Cost incurred in hiring and training each new employee. (b) Cost of overtime work required from regular workers in order to maintain the required level of production until the new employee can do his share. (c) Less of production in the interval between separation of the former employee and time when his replacement is fully broken in. (d) Expenses in equipment or facilities not being fully utilized during the training period. Since labour turnover is a general condition, almost a diseases, it manifestation elsewhere, if accurately and scientifically presented, can be as important to a managerial personnel as date concerning diseases similarly reported to a public health officer. To avoid this situation it is suggested that the industrial managers and organizers must deal with individuals not groups. If individuals if properly handled, work for managements objectives; group will inevitably oppose management. If we engender competitive spirit among the workers if we breakup the attachment to the group, the result may be increased production. But nevertheless, cohesive will groups show greater team work if it is handled in a cohesive manner. Its member will get greater social satisfaction from working together. Moral is higher. Turnover is frequently lower and at this stage it is easy to supervise closely knit groups. Since the supervisor need not repeat information and order to every member, the informal leader will act as an effective channel of communication to and from the supervisor. A dis-satisfied group finds it hard to work together and may direct its aggressiveness against management in the form of poor workmanship, sabotage, grievances and wile-cat-strikes. On  23 the other hand certain damages arise when the work group becomes too tightly knit. Such a group may be reluctant to accept new employees as members, and through there may be more co-operations within the group with outsiders may suffer. Thus competition and ill feelings may develop among rival groups. Cohesion results in higher productivity only if the group accepts management demands for higher production as legitimate. 2. (c) Causes: The ground which prompts a person to leave his employment can of tern be discovered only after a detailed and sympathetic interview of the workers and managerial personnel. The causes of labour turnover may also be discovered form various surveys and the tabulation made from statistics on labour turnover as collected statutorily under the Collection of Statistics Act 1953 in India on a uniform basis for various industries. The analysis will show that these causes are as follow: (I) Resignations: Resignation may be due to a variety of reasons such as dissatisfaction with working condition, insufficient wages, bad health, sickness, old age, family circumstances better job opportunities last but not least, exodus to the village for agricultural operations. The village nexus is still strong in certain industries, especially in mining, plantations, cotton and jute textiles and in unorganized industries like shellac, rice milling, mica, splitting etc. The workers do not get long leave for going to village and, hence, they resign at the time of harvesting or sowing of the crops. Moreover, workers who make periodic often regard industrial employment as merely a second string to the bow. (II) Dismissals : Dismissal itself is not so cute a reason of labour turnover albeit it appears to be a lesser cause of labour turnover. Nevertheless it is important in itself. Dismissal may be due to disciplinary action in cases of inefficiency, insubordination, avenues from time to time to the workers. More important is the sense of security and keeping high moral of the workers. It could be done by giving them security in job, keep satisfactory relations between the employer and employee and providing promotion opportunities at all stages. (III) Besides, the agency of recruitment in most industries provide much scope for corruption and criterion and the jobbers are always trying to dismiss the old hands and recruit new ones in order to swell their own pockets. Thus the problem of labour turnover is to a large extent bound up with that of recruitment will reduce labour turnover. (IV) Measurement should be adopted to improve the economic position of worker and give them security of employment and other facilities essentially in industrial towns so that the workers may go to the villages as frequently as they do now.  24 (V) The badli control system, introduced in certain places & industrial cities can also reduce labour turnover. (VI) Establishment of employment exchanges, restriction on the power of jobbers and proper organizations of personnel department may also be a good weapon in reducing the labour turnover. (VII) Improvement of working conditions, welfare activities social insurance schemes, leave and holidays, better wages, working participation in management will also make the labour force more stable than at present. (VIII) Besides, the workers organizations and cohesive group also should be encouraged and improve so that the grievance of the workers may be put collectively before the employer. This will helpful in avoiding dissatisfaction among the employees and would lead to the better relations between employers and employees. ABSENTEEISM Absenteeism is a peculiar, acute, and common problem throughout to the industrial world including India. The problem of absenteeism is a challenge to the managerial personnel because it causes indiscipline and other industrial evils. The problem of absenteeism is also recognized as a positive symptom of low morals. (a) Definition and Meaning: The term ―Absenteeism‖ is used to connote any absence of permanent worker from work whether authorized or unauthorized. Absenteeism refers to the worker‘s absence from his regular task, no matter what the cause is. The term ―Absenteeism‖ was properly defined for the first time, in a circular of the labour department, Govt. of India, issued to the provisional Govt. before independence. Accordingly, absenteeism rate is defined as the total man shifts lost because of absence as a percentage of the total number of man shifts schedule. In this sense there is a difference between the man days scheduled to work by the permanent workers and the man days actually worked by them. The man days scheduled to work and computed by multiplying the number of permanent workers with the number of days of work lost due to strikes or lock-out are excluded from these estimates. The calculation of man days actually worked in the month is made by to filling the daily attendance of permanent workers. For calculation the rate of absenteeism we require the number of person‘s scheduled to work and the number actually present. A worker who reports for any part of the work-shift is considered as present. An employee is to be considered scheduled to work when the employee has no reason to expect well in advance, that the employee will not be available for  25 work at the specified time. Following examples illustrate the application of principle. An employee on a regular scheduled vacation should not be considered as scheduled to work or absent. The same is true during an employer‘s ordered layoff. On the other hands, an employee who request time-off at other than a regular vacation period should be considered as absent from scheduled work until he returns, or until it is determined that the absence will be of such duration that his name is removed from list of active employees. After this date he should be considered as neither scheduled to work nor absent. Similarly an employee who quit without notice should be considered absent from scheduled work. His name is dropped from the active list, but preferably this period should not exceed one week in either case. If a strike is in progress worker on strike should be consider as neither scheduled to work nor absent since data on time lost because of strikes are collected by other means. This definition does not include absence on account of authorized leave, payoff, retrenchment, strikes etc in the category absenteeism. For the purpose of calculation of absenteeism in different industries the above official definition is considered as authentic even by Labour Bureau, Ministry of Labour, Govt. of India. (a) Nature: The general of nature absenteeism results due to sickness or accident, social and other religious causes. Unusually high rate of absenteeism is due to boredom, frustration, lack of recognition and other inherit and environmental condition. Recognition of high rate of absenteeism ahs encouraged management to examine them carefully. The high rate of absenteeism found in of many Indian industries are the measure of accommodation which Indian employers have made to the demands of Indian workers that they have considerable periods of time off, work for visit to their home villages for a variety of reasons including genuine or feigned illness. Absenteeism is costly to the worker in terms of lost earning and the increased possibilities of discharge. (b) Effect of Absenteeism : The problem of absenteeism has diverse effect which may be explained as follows:- (I) Effect on Workers : There is a distinct loss to workers. It adversely affects the economy of the worker himself. Its reduces his earning and adds indebtedness, decreasing the purchasing power, make it difficult for him to meet necessities of life, leading to personal problems of attitude and moral and in many cases loss of employment and resultant disaster for his dependents.  26 (II) Effect on industry and Employer : Absenteeism is industry stop the work process, create the bottlenecks, hampers smooth flow or continuity of work, upsets production targets, results in productions losses, increases direct overhead cost, increases work load of inexperienced, unskilled workers. All these factors can also create problem of recruitment, training, job adjustments, morals and attitudes. Casual, unskilled and substitute workers increase tool down time, rejection of finished products, breakdown which may result in idle machine hours. Absenteeism on the other hand, directly contributes to the rise in the production cost while on other it deprives the industry of its hard earned reputation due to deterioration in quality of goods produced and the delay in supply to the consumers. Thus absenteeism is an evil both for the employees and the employers It causes industrial losses, low working capacity of the worker, production delay and increased cost. (c) Causes : Absenteeism falls into different categories according to the reasons which bring about. These categories will vary slightly from place to place and due to difference in the nature of human being. Some of them as follows:- (I) Sickness : Sickness is a cause of absenteeism is more significant than any other reasons. Sickness must be distinguish as either certified sickness or not certified by a doctor. Expediencies like Cholera, Small-Pox and Malaria always break out in sever forming most industrial areas. The low vitality of Indian workers make them an easy prey to such epidemics. (II) Impersonal Behavior of the Employers : Impersonal attitude of the employers toward the workers is also a reason of absenteeism. In the modern industries every worker wants to remain free and to express his view freely. But, once the employer negativities or does not recognize his ambitions and freedom of expression, he became aggressive. This aggressiveness leads him to other persons and groups, because collectively he will be heard and individually he will be ignored. An individual thus get no chance of freedom of expression. He becomes antisocial and frequently remains absent as per the direction of the other fellow being. In this way his habits are distorted and cordial relations do not exit. (III) Bad working Condition : Bad working condition cause many evils and diseases. In many industrial countries like India the working is h handicapped by climatic condition. High environmental temperature reduces the working capacity.  27 In many factories the roofs are not suitable and many types of pollutions have worsened the working condition of workers. Ultimately the worker remains absent and later on he becomes a habitual absentee. (IV) Unsuitable Working Hours : In the factories where running shifts are there absenteeism during the night shift is more than in a day shift owing to the greater discomfort of work during night time. (V) Frequent Urge of the rural Exodus : The most important cause of absenteeism, however, is the frequent urge of rural exodus. The rate of absenteeism is higher at the time of harvesting and sowing of the crops. (VI) Inadequacy of Welfare Activities : The vast majority of industries still regards welfare work as a barren liability rather than a wise investment. If an industry does not provide better facilities and does not invest its resources in welfare activities then it reduces the strength and stamina of the workers and thus causes labour turnover and absenteeism. (VII) Insecurity of Employment : Insecurity of Employment is very common factor in most of the factories. It leads to formation of complexes and inhibitions in a worker. He is not given any sense of belonging psychologically. He stays away off and on because he is not made to feel that he has real place in the scheme of things. He know that nobody bothers much about him and this feeling leads him to remain absent from the work. (VIII) Miscellaneous Reasons : Industrial accidents, social and religious ceremonies, festivals, arrival of guest, drinking and gambling, in sanitary living condition, shortage of accommodation, hazardous nature of work, inadequacy of transport facilities, ration difficulties and the like are also the causes of absenteeism. Absenteeism has been found to be higher among women than men due to women‘s house hold duties, maternity leave etc. age, marital status, education, regulation politics, geographical condition, leave facilities, Supervisory qualities are also the other relevant reasons. (d) Remedies : Certain remedies may be suggested as remedial measures in controlling the problem of absenteeism in the industries these are as follows: (I) Proper condition of the work in the factory adequate wages, protection for accidents and sickness and facilities for obtaining leave etc. are the effective means to reduce absenteeism. (II) Excessive fatigue and sweltering condition of work are bound to create defense mechanism in the work, and if abiding result are to be obtained, the best policy would be to improve condition of work and life for the workers and make them fell contented and happy.  28 (III) Besides, the most effective way of dealing with absenteeism is to provide holydays with pay or even without pay and permit workers to attend to their private affairs occasionally and thus regularize absenteeism, instead of merely taking disciplinary action for it. (IV) Providing good facilities, welfare schemes and suitable housing accommodation will also check the high rate of absenteeism in the industries. (V) Workers, who are unable to attend work due to illness, accident or personal circumstances must arrange for their immediate supervisor to be, notified the reason of absence. If absence is due to sickness, certificate must be produce by the employee. (VI) It is the responsibility of each employee to keep the employer advice of the Circumstances which are preventing him from attending work so that the employer may realize its wrongs or slackness etc, and would be able to avoid such circumstances. (VII) Employers who are absent from work due to reason other than sickness or accidents are required whenever possible to obtain prior permission of supervisor. (VIII) The employer must consider each cause of persistent absenteeism on its merits, where such absenteeism appears to be unreasonable or unwarranted. Employees may be liable to disciplinary warning and in certain case dismissal. (IX) It is generally believe that Employee‘s State Insurance Schemes are prevailing in India, is a desirable social security measures but in many cases misused as a convenient umbrella for concealing feigned sickness. Presented with a medical certificate under this scheme there is relatively very little that the employer can do even if he is in possession of reasons to suspect its validity. (X) Other remedies may be encashment of unveiled leave, advance planning of leave by workers, delayed shift changed, introducing a five days week, granting regularity allowance providing transport facilities, exhortation and counseling at all levels. (XI) Commitment to industrial employment, however, implies more than presence of workers on the job. It involves also their acceptance of industrial discipline and the performance of tasks under supervisions. LABOUR EFFICIENCY Labour efficiency is the capability of labor to raise the output of products and goods without raising the labor force. If the labor force is efficient then the production level of goods and products will be increased.  29 LABOUR EFFICIENCY AND DETERMINING FACTORS Labour Efficiency Ratio The labour efficiency ratio measures the performance of the workforce by comparing the actual time taken to do a job with the expected time. Expected hours to prod uce output Labour Efficiency Ratio = x 100% Actual hours to produce output Labour Capacity Ratio The labour capacity ratio measures the number of hours spent actively working as a percentage of the total hours available for work. Number of hours actively spent working Labour Capacity Ratio = x 100% Total hours available Labour Production Volume Ratio The labour production volume ratio compares the number of hours expected to be worked to produce actual output with the total hours available for work. Expected hours to produce actual outpu 𝑡 Labour Production Volume Ratio = x 100% Total hours available  30 Labour Efficiency Variance The labour efficiency variance measures the ability to utilize labor in accordance with expectations. The variance is useful for spotlighting those areas in the production process that are using more labour hours than anticipated. This variance is calculated as the difference between the actual labour hours used to produce an item and the standard amount that should have been used, multiplied by the standard labour rate. If the variance outcome is unfavourable, there will likely to be a review by industrial engineers to see if the underlying process can be improved to reduce the number of production hours required, using such means as:  A simplified product design to reduce assembly time  A reduction in the amount of scrap produced by the process  Increasing the amount of automation  Altering the work flow If this cannot be done, then the standard number of hours required to produce an item is increased to more closely reflect the actual level of efficiency. The formula is: (Actual hours - Standard hours) x Standard rate = Labour efficiency variance An unfavourable variance means that labour efficiency has worsened, and a favourable variance means that labour efficiency has increased. The standard number of hours represents the best estimate of a company's industrial engineers regarding the optimal speed at which the production staff can manufacture goods. This figure can vary considerably, based on assumptions regarding the setup time of a production run, the availability of materials and machine capacity, employee skill levels, the duration of a production run, and other factors. Thus, the multitude of variables involved makes it especially difficult to create a standard that you can meaningfully compare to actual results. There are a number of possible causes of a labour efficiency variance. For example:  Instructions. The employees may not have received written work instructions.  Mix. The standard assumes a certain mix of employees involving different skill levels, which does not match the actual staffing.  Training. The standard may be based on an assumption of a minimum amount of training that employees have not received.  31  Work station configuration. A work center may have been reconfigured since the standard was created, so the standard is now incorrect. Tracking this variance is only useful for operations that are conducted on a repetitive basis; there is little point in tracking it in situations where goods are only being produced a small number of times, or at long intervals. Labour Efficiency Variance Example During the development of its annual budget, the industrial engineers of Hodgson Industrial Design decide that the standard amount of time required to produce a green widget should be 30 minutes, which is based on certain assumptions about the efficiency of Hodgson's production staff, the availability of materials, capacity availability, and so forth. During the month, widget materials were in short supply, so Hodgson had to pay production staff even when there was no material to work on, resulting in an average production time per unit of 45 minutes. The company produced 1,000 widgets during the month. The standard cost per labour hour is $20, so the calculation of its labour efficiency variance is: (750 Actual hours - 500 Standard hours) x $20 Standard rate = $5,000 Labour efficiency variance CAUSES OF LOW EFFICIENCY OF INDIAN LABOURERS: 1. Unfavourable Climate: Our country falls in the north temperate type of climate, where the climate is hot. The workers feel fatigue and tired and they cannot work for longer period. At present, scientific methods and being adopted to provide workers better working condition like air condition room, freeze cold water to drink, but they are not as per requirements. 2. More Hours of Work and Less Leisure: Indian labourers are exploited. More than the required and fixed hours work is taken with less leisure hours. In foreign countries like Japan and America a worker has to work for five days in a week. They are allowed two days holiday to look after their own health and the welfare of the family members. 3. Place of Work: Surroundings of the place of work where our workers do work are not healthy. Factories are not well-ventilated. Insufficient space is provided for movement between machines and provision for fresh water, refreshment and rest between work is not found.  32 4. Lack of Education and Training: There is dearth of educated and trained labourers in India. Untrained and uneducated labourers do not understand the intricacies of his job in a better way. 5. Low Wages: A worker who receives wages is low not even to meet the necessaries of life. Sufficiently low wage ensures inadequate standard of living with less efficiency. Therefore, it is essential that workers must be paid fair wage so that they may increase their standard of living. 6. Lack of Labour Welfare Activities and Social Security: In India there is a less provision for welfare activities and social security for workers. But at present government has taken solid steps to improve the condition of social activities and social security activities. For example—Under Employees State Insurance Act, 1948 provision of social securities for workers. 7. Low Standard of Living: Indian workers standard of living is very low because they get low wages. Provision for so many wage be made so that workers may have proper living accommodation and their children may have appropriate education. 8. Religious Factors: Indian workers are more superstitious and they believe and depend more on luck. They fear more in name of religion. Therefore, they cannot take any such steps which may be considered against religion. 9. Use of Old and Obsolete Machines: Majority of the industries in India are using old and obsolete machines. The effect of which is that in-spite of hard work, workers are not in a position to produce what is required. Lack of modern machines decreases efficiency of workers. 10. Lack of Efficient Management and Organisation: In India there is lack of efficient and well organised management which works as obstruction in the efficiency of the workers. 11. Exploitation of Labourers: In India, rich people mostly try to take more work from workers. They pay less wages and exploitation of workers is very common and is prevalent here. 12. Evils of Trade Unions: To help workers, trade unions have not developed as is expected. Further, in trade unions itself, there is conflict and they quarrel for supremacy among themselves.  33 13. Indebtedness: Indian workers are born in debt, live in debt and when they die they are in debt. They pay major part of their income as interest to the moneylenders. Unless these evils and short comings are not removed or some reform is not made Indian workers cannot have bright days. SUGGESTIONS FOR IMPROVEMENT Economists are of this firm opinion that Indian labour is not regarded as very efficient. His productive capacity is low as compared with the European, the American and the Japanese Labour. For less efficiency Indian labourers are not very much responsible alone because they are without education and the climatic conditions in which they normally do work is un-favourable. Further, the factory conditions are trying, wages are low and working hours are long. The entrepreneurs are themselves of lower efficiency. The workers mostly live in debt because they waste their money in drinking and gambling. It is really very surprising how under these circumstances the workers are able to do what they are doing. Therefore, it has been suggested that in order to improve the efficiency of our labour, it will be better if we should impart them general and technical education. We should improve the working conditions in and around the factories as well as the living conditions of the workers. We should provide them with modern and up-to-date machinery, tools and proper materials. Labour should be looked after in a better way. Their remuneration should be proper and incentive and the working hours should be reduced. Factory must be equipped with heating arrangements in winter season and cooling arrangements in summer season. Further, the workers should be treated as human beings and not as the property or the slaves of the capitalists. If we will take all these measures then the efficiency of Indian labour is bound to go up and the production will increase.  Sharma, A.K., ―Labour Economics‖, Anmol Publication Pvt Ltd, New Delhi.  Sexana, R.C. ―Labour Problems and Social Welfare – K. Nath and Co, Meerut.  Thyagi, D.P. ―Labour Problems and social software‖.  34 UNIT III LABOUR MARKET DEFINITION- LABOUR MARKET A labour market is the place where workers and employees interact with each other. In the labour market, employers compete to hire the best, and the workers compete for the best satisfying job. Description: A labour market in an economy functions with demand and supply of labour. In this market, labour demand is the firm's demand for labour and supply is the worker's supply of labour. The supply and demand of labour in the market is influenced by changes in the bargaining power. SUPPLY OF LABOURS Introduction In this first part of the subject guide we introduce you to the theory of labour supply. This part of labour economics helps us understand why some individuals decide to work and why different individuals choose to work different hours in the labour market. We first concentrate on the theory of static labour supply, which examines the decisions of one individual at one point in time. Each individual in the market decides whether to work and – if he decides to work – how many hours to work, given the current market wage and any source of nonlabour income. In order to derive this theory we use the standard tools of microeconomics that you have learnt in the first years of your degree. This model is extremely helpful in understanding a number of issues that are of policy concern. For example, the model helps us understand how unemployment benefits affect participation in the labour market. many hours to work in the labour market, individuals take into account not only their current wage but also the profile of their ages throughout their working lives. In order to distinguish this from the static theory of labour supply, we refer to this as the inter-temporal (or life cycle) theory of labour supply. Some basic concepts: measures and definitions Before illustrating the theory of labour supply, it is useful to introduce some fundamental concepts. You might have read many times in the newspapers that the unemployment rate is higher in Europe than in the USA. But what exactly is the unemployment rate? How do we measure it? And is this the only measure of the performance of the labour market? According to the standards set by the International Labour Office, an  35 individual is employed (denoted by E) if she works for pay for more than one hour per week. A person who is not employed is not necessarily unemployed. In order to be qualified as unemployed (denoted by U), she must have used at least one active method to look for a job in the last four weeks or she must be willing to start a job and able to take one up within two weeks if offered one. We refer to those who are either employed or unemployed as active, or in the labour force (denoted by LF): If you pay a bit of attention to these definitions, you will realise that there are a number of individuals who are neither employed or unemployed. These are called inactive or out of the labour force (NLF). These include, among others, pensioners, students and those who serve in the military in those countries with compulsory draft. Since individuals are either active or inactive, their sum is the working-age population (denoted by P): P = LF + NLF One index that labour economists use to measure how well a certain labour market is doing is the unemployment rate, which is defined as the ratio between the total number of unemployed and those in the labour force: ur = U/LF Sometimes we are not interested in the proportion of those without a job but in the proportion of those who have a job or would like to take one. Labour supply One typically used measures of labour market performance is the labour force participation rate: lfpr = LF/P which is the ratio between the labour force and population. This is also called the activity rate. The employment to population rate is the ratio of total employment to total working-age population: epr = E/P and the employment rate is er = E/LF. Static labour supply In order to derive the static theory of labour supply, we use the standard tools of consumer theory. Recall that consumer theory helps us understand how an individual (the consumer) allocates a certain amount of money (income) to her expenditure on different goods. Her utility-maximising bundle will depend on the level of income and the relative prices of the different goods. But, as we suggested in the introduction to this guide, most  36 people derive their income from working. People sell their work in the market to buy consumption goods through labour earnings. If people want to consume more goods they will have to work more. However, people dislike working because this reduces their free time. Work in this sense is a ‗bad‘. Utility function An easy way to embody this concept into the standard consumer model is to assume that individuals‘ utility depends not only on consumption but also on leisure. Leisure is the amount of time that workers devote to nonproductive activities and therefore it is a ‗good‘. If T is the individual‘s time endowment (for example 14 hours a day, once we have subtracted from the 24 hours the amount of time devoted to sleep and personal care) and H is hours of work (for example 8 hours), it must be that: (1) L=T-H where L denotes leisure (for example 6). A rise in hours of work is associated with a one-to- one fall in leisure. Equation (1) is called the time constraint. A rational worker maximises her utility that depends on leisure and consumption: (2) MaxC,L U = U(C, L) In Figure 2.1 we have drawn a set of indifference curves (i.e. the loci of consumption and leisure combinations corresponding to a given level of utility). On the horizontal axis we measure leisure and on the vertical axis, consumption. Since, as leisure increases, hours of work decrease, one can travel from right to left on the horizontal axis to measure hours of work H. At the origin, for example, L = 0, which implies that H = T. But as we move to point A, leisure has increased, which suggests that hours of work have decreased.  37 Marginal rate of substitution The slope of the indifference curve at a given point is called the marginal rate of substitution (MRS). The marginal rate of substitution measures the change in consumption that is required to keep utility unchanged as leisure changes by one unit. This is often expressed as dC/dL|U (i.e. the derivative of consumption with respect to leisure along an indifference curve (that we represent by the subscript U to signify at ‗given‘ utility)). The MRS is a negative number since consumption has to increase for utility to stay unchanged as leisure decreases by one unit. The increase in consumption which is required to keep utility unchanged as leisure decreases by one unit varies with the level of leisure. If the worker consumes very little leisure she will value her leisure highly. If she is required to reduce leisure by one unit she will need a high increase in consumption to keep her utility unchanged which suggests that the absolute value of the MRS is high. This is a situation corresponding to point P in the figure where the indifference curve is steep. But if the consumer is already consuming plenty of leisure she will not value leisure very highly and she will only require a small increase in consumption for a one unit reduction in leisure to maintain her utility unchanged. This corresponds to a point like P' in the figure where the indifference curve is relatively flat. The marginal rate of substitution is therefore decreasing in leisure. Constraints A rational consumer will want to maximise her utility in (2). But she cannot choose freely any bundle of consumption and leisure. She faces two constraints. The first constraint comes from the fact that extra consumption can only be afforded at the cost of extra work. This is called the budget constraint and it is written as follows: (3) C = V + WH where V is unearned income that is to say any income level the workerreceives which is independent of how much she works. For example, state benefits paid to the unemployed, or the money transfers children receive from their parents are all sources of unearned income. Implicitly we have assumed here that the price of consumption goods is equal to one. W is the market wage rate, or the increase in income associated withone extra hour of work H. The budget constraint simply states that any expenditure on consumption (C) must be financed by either earned income (WH) or by unearned income (V). We assume in this case that one cannot borrow and there are no savings. Adding to both sides of (3) the quantity WL and exploiting (1), the budget constraint can be rewritten as: (3’)C + WL = V + WT  38 The left-hand side is total expenditure on the two goods: consumption and leisure. The wage rate W can be thought of the price of leisure. It is the essentially the amount of money that the worker has to give up if she wants to consume one extra unit of this good. The right-hand side is the sum of unearned income (V) plus the income the worker would gain if she devoted all her available time to work (WT). The sum of these two components is called full income. This equation looks very much like the budget constraint in a classical consumer optimisation problem. On the left-hand side we have expenditure and on the right ‗income‘. A basic difference here is that income depends on W, that is on the price of one of the goods. This circumstance suggests that the worker‘s problem is somehow ‗special‘. A rise in the wage rate W has two effects in this model. Not only does it alter the relative price of the two goods by making leisure more expensive but it also affects the total amount of consumption goods a worker can afford at a fixed number of hours of work. It is important that you keep this in mind because this is one of the most important differences between classical consumption theory and the Theory Of Labour Supply. The second constraint the worker faces is that the total number of hours she can work in the market cannot be negative or greater than T: (4) 0 ≤ H ≤ T Equations (3‘) and (4) define the worker‘s opportunity set, which we have drawn in Figure 2.2. This is the set of consumption-leisure combinations that are achievable by the worker. Again we have reported leisure on the horizontal axis and consumption on the vertical axis. Equation (4) restricts the set of feasible bundles to the area between the vertical axis and the vertical line at L=T. The downward-sloping line is the budget constraint (3‘) whose slope is – W, the (negative of) the wage rate. This line intercepts the vertical axis at V+WT, which simply says that at zero hours of leisure the worker can devote her full income to consumption. At point D a worker consumes T hours of leisure (and works zero hours) and can afford V of consumption goods. This is called the endowment point. With a utility function and the two sets of constraints we now have all the elements to solve the worker‘s problem. To start with, we concentrate on the decision on whether to work or not, also called the participation decision. Later on we study the optimal number of hours of work for those who decide to participate.  39 Participation decision We have said in the introduction that not everybody in the population qualifies as active. In order for people to participate they must be offered a high enough market wage W. If the worker were offered a wage that was unreasonably low, she would rather not work. We define the reservation wage as the minimum wage rate which makes a worker indifferent between working and not working. We denote this by W*. The worker will participate in the labour market if the market wage is at least equal to the reservation wage: W > = W* Otherwise, if WH''-H' and total number of hours of work increase (H'>H).  43 Labour demand Introduction we analysed the motivations behind the individual decision to supply labour services to a firm. We turn now to the other side of the coin and we study the demand for labour. This is to say, we analyse how many workers a firm will decide to put on its payroll, when it will be profitable for a firm to hire new workers and when it will be more likely that workers will be fired. Although we will discuss policy issues in the next chapter, where we analyse the market equilibrium, it is worth pointing-out at this stage that many of the central questions in economic policy involve the number of workers that firms employ and the wage that these workers get paid. Such diverse policies as the minimum wage, employment subsidies, and restrictions in firing or laying off workers are attempts to regulate various aspects of the firms‘ labour demands. We start this chapter by analysing the objective of the firm and what it does to achieve its objective. This allows us to set up the essential features required to analyse the demand for labour. Next, we study the determination of the demand for labour (at the firm and the industry level) when labour is the only variable input of production. The so-called short-run analysis is followed by the long-run analysis where the firm can vary all inputs, not only labour, at will. We finish this chapter by pointing out the potential importance of non-wage labour costs to the demand for labour. The objective of the firm Consider a company that produces some good or service, which sells at the market price. The revenue of that firm is the price of each unit of output, P, times the number of units produced, Y (1) Revenue = P*Y. This firm produces output by using factories, machines, office space, etc. (i.e. capital) and by hiring a given number of employee hours (i.e. labour) to operate the machines and sell  44 the good. We will summarise the production capabilities of the firm by using the following production function: (2) Y=F (L, K). Where L is the total number of hours the firm hires and K is the stock of c