CHAPTER-V

LABOUR COST 

Labour cost is one of the most significant factors for studying the economic viability of any industrial activity for an entrepreneur before venturing into the industrial field. It helps in studying the extent of expenditure incurred by entrepreneurs on labour welfare and social security aspects, in addition to wages/salaries paid to them.  In addition to it, it also helps in (a) reliable costing, (b) wage fixation on a realistic basis, (c) logical collective bargaining, (d) evolving implementation and evaluation of welfare measures, (e) study of trends over a period of time, (f) location of industry and the like. Labour Cost data are also important for policy formulation at the national and regional levels.  With this end in view, data on various aspects of labour cost are collected every year, which inter-alia include the expenses incurred by the industrial establishments on wages/salaries, bonus, contributions to provident and other funds, and staff welfare expenses in respect of workers employed directly or through contractors.  The aggregate of these components gives the labour cost. When used in conjunction with the number of mandays worked, this gives the average labour cost per manday worked. 

5.1     Average Labour Cost 

     State-wise and Industry-wise data on average Labour Cost per manday worked, separately, for workers employed directly or through contractors as well as for all workers during the year 2001-2002 are given in Tables 5.1.1 and 5.1.2, respectively.  The Tables reveal that at the all India level, the average labour cost per manday worked in respect of all workers was Rs. 242.36. Amongst directly employed workers, the average labour cost per manday worked was Rs. 315.90 for men, Rs. 110.43 for women and just Rs. 54.69 for child workers.  For workers employed through contractors, the average labour cost per manday worked was Rs. 105.91.  

Average labour cost per manday worked in Public Sector was Rs. 423.99 as against Rs. 390.69 in Joint Sector and Rs. 205.23 in Private Sector. For directly employed male workers, average labour cost per manday worked was Rs. 458.26 in Public Sector, as compared to Rs. 273.75 in the Private Sector and Rs. 451.78 in the Joint Sector. For directly employed female workers, average labour cost per mandays worked was Rs. 305.51 in Public Sector, as compared to Rs. 340.30 in Joint Sector and Rs. 101.41 in Private Sector. For directly employed child workers, average labour cost per mandays worked was Rs. 122.00 in Joint Sector, as compared to just Rs. 32.84 for Private Sector.  

5.2     Average Labour Cost by States 

Table 5.1.1 reveals that the highest average labour cost per manday worked in respect of all workers was reported at Rs. 466.23 in Jharkhand, followed by Rs. 348.03 in Uttaranchal and Rs. 332.95 in Chhatisgarh, all the three being newly created states. The lowest average labour cost per manday worked was reported at Rs. 60.62 in Manipur, followed by Rs.75.76 in Nagaland. The highest average labour cost per mandays worked in respect of directly employed male workers was reported at Rs. 510.74 in Jharkhand, followed by Rs. 445.14 in Orissa and Rs. 443.88 in Maharashtra. Among directly employed women workers, the highest average labour cost per manday worked was reported in Uttaranchal at Rs. 527.91 and the lowest in Manipur at Rs. 46.07 only.  Among children, the highest average labour cost per manday worked was reported in Karnataka at Rs. 122.00 and the lowest at Rs. 28.92 in Assam. The highest and lowest average labour cost per days worked in respect of contract workers was reported at Rs. 202.19 in Chhatisgarh and at Rs. 52.85 in Nagaland, respectively. 

At least in three States, viz., Uttaranchal, Meghalya and Chhattisgarh, the average labour cost per manday worked in respect of women workers was higher than that of their male counterparts. The reason for more average labour cost on women workers may be either due to payment of some arrears to these workers during the current financial year or women workers might be doing more skilled job in some of the industries in these States. 

5.3     Average Labour Cost by Industries 

     Analysis of Table 5.1.2 shows that for all workers, the highest average labour cost per manday worked was reported at Rs. 812.85 in the industry group ‘353–Manufacture of aircraft and spacecraft’ and the lowest in industry group '160-Manufacture of tobacco products' at Rs. 63.59 only. For directly employed male workers, the highest average labour cost per mandays was reported in industry group ‘232-Manufacture of refined petroleum products' at Rs. 1163.01 and the lowest in industry group '014-Agricultural and animal husbandry services activities, except veterinary activities' at Rs. 90.39. For women workers, the highest average labour cost per manday was reported in industry group '351-Building and repair of ships and boats' at Rs. 1233.11 and the lowest in industry group '182-Dressing and dyeing of fur, manufacture of articles of fur' at Rs. 37.53 only.  Among child workers, the highest average labour cost per manday worked was reported in industry group '181-Manufacture of wearing apparel, except fur apparel' at Rs. 109.00 and the lowest in industry group '154-Manufacture of other food products' at Rs. 52.61 only. 

     Atleast in two industry groups, viz., '152-Manufacture of dairy products' and '351-Building and repair of ships and boats', the average labour cost per mandays worked in respect of women workers was higher than that of their male counterparts. The reason for more average labour cost on women workers may be either due to payment of some arrears to these workers during the current financial year or women workers might be doing more skilled job in these industries. 

5.4         Composition of Labour Cost by Components 

5.4.1 Wages/Salaries as part of Labour Cost 

State-wise and Industry-wise statistics on wages/salaries per manday worked are presented in Table 5.2.1 and 5.2.2, respectively.  The Tables reveal that the highest wages/salaries paid per manday worked to all workers was reported in Jharkhand at Rs. 361.43, followed by Uttaranchal at Rs. 274.17 and Chhattisgarh at Rs. 259.26. Among male workers, the highest wages/salaries paid per manday worked was reported at Rs. 394.83 in Jharkhand and the lowest at Rs. 63.77 in Manipur. Among women workers, the highest and lowest wages/salaries paid per manday worked was reported at Rs. 387.80 in Uttaranchal and Rs. 45.28 in Manipur, respectively. 

Among Industries, the highest wages/salaries paid per manday worked to all workers was reported at Rs. 689.04 in industry group ‘353–Manufacture of aircraft and spacecraft’ and the lowest at Rs. 53.14 in industry group '160-Manufacture of tobacco products'. 

At least in 3 industries groups, viz., 152, 272 & 351, the average labour cost per mandays worked of women workers was higher than of their male counterpart.  

5.4.2 Bonus as part of Labour Cost 

State-wise statistics on bonus paid per manday worked during the year 2001-2002 are presented in Table 5.3.1. The Table shows that at all India level, the average amount of bonus paid per manday worked for all workers was Rs. 12.17. Amongst different categories of workers, the amount of bonus paid per manday worked was reported at Rs. 16.42 for men, Rs. 8.85 for women, Rs. 3.53 for children and Rs. 7.32 for contract workers. Among States, the highest and the lowest amount of bonus paid per manday worked to all workers was reported in Jharkhand at Rs. 26.98 and Manipur at Rs. 1.61, respectively. 

Among States, the highest amount of bonus paid per manday worked to contract workers was Rs. 20.92 in Chandigarh.  The highest amount of bonus paid to directly employed male workers was Rs. 32.14 in Jharkhand.  As far as women workers were concerned, the highest amount of bonus paid per manday worked was Rs. 39.98 in Uttaranchal, followed by Rs. 32.65 in Jharkhand.  Atleast in five States/Union Territories, viz., Uttaranchal, Uttar Pradesh, Tripura, West Bengal and Jharkhand, the average amount of bonus paid per manday worked to women workers was higher than that of their male counterparts. 

Industry-wise statistics on bonus paid per manday worked are presented in Table 5.3.2.  The Table reveals that the highest amount of bonus paid per manday worked to all workers was Rs. 41.54 in industry group ‘232-Manufacture of refined petroleum products' and the lowest at Rs. 2.44 in industry group '160-Manufacture of Tobacco products'. Among contract workers, the highest amount of bonus paid per manday worked was reported to be as high as Rs. 80.96 in industry group '353-Manufacture of aircraft and space craft'. Among directly employed male workers, the highest amongst of bonus paid per mandays worked was recorded at Rs. 65.87 in industry group ‘232-Manufacture of refined petroleum products' and the lowest at Rs. 5.31 in industry group ‘182-Dressing and dyeing of fur; manufacture of articles of fur'. For directly employed women workers, the highest amount of bonus paid per manday worked was recorded as Rs. 44.63 in industry group '271-Manufacture of basic iron and steel'. Atleast in 14 industry groups, viz. 152, 251, 269, 271, 291, 300, 314, 315,319, 321, 322, 343, 351 and 352, women workers were paid higher amount of bonus per manday worked as compared to their male counterparts. 

5.4.3 Contributions to Provident and other funds as a component of Labour Cost 

State-wise statistics on contributions to provident funds and other funds made by employers for the social security of their employees are presented in Table 5.4.1.  The Table shows that at the all India level, employers contributed Rs. 33.12 per manday worked for all workers towards provident and other funds. In respect of directly employed male workers, this amount was Rs. 45.44, while in respect of directly employed women workers, it was Rs. 12.48 only. Among States/Union Territories, Jharkhand topped the list with highest contribution of Rs. 62.63 per manday worked, whereas, Manipur featured at the bottom with the contribution of just Rs. 2.45 as provident and other funds per manday worked. 

Analysis of the Table 5.4.2 reveals that the contributions to provident and other funds was highest in industry group ‘341–Manufacture of motors vehicles’ at Rs. 145.70 per manday worked, followed by industry group ‘311–Manufacture of electric motors, generators and transformers’ with contribution of Rs. 137.60 per manday worked. The lowest contribution by employers towards provident and other funds was in industry group '014-Agricultural and animal husbandry services activities, except veterinary activities' with just 3.29 per manday worked.     

5.4.4 Welfare Expenses as component of Labour Cost 

State-wise and Industry-wise statistics on expenses incurred by employers on the welfare of their workers during the year 2001-2002 are presented in Tables 5.5.1 and 5.5.2, respectively.  

The Table 5.5.1 shows that at all India level, the employers on providing welfare facilities to their workers spent Rs. 18.20 per mandays worked. The highest amount per mandays worked on the welfare of their workers was spent by employees in Goa at the rate of Rs. 41.49, followed by Bihar with an expenditure of Rs. 31.45 and Maharashtra with an expenditure of Rs. 26.87. The lowest contribution on welfare expenses was reported in Manipur at the rate of Rs. 1.78 per manday worked. The highest amount per manday worked spent on welfare of workers was reported at Rs. 54.46 in Goa for male workers, Rs. 75.20 in Chhattisgarh for women workers, Rs. 10.91 in Gujarat for child workers and Rs. 29.56 in Goa for contract workers.  

 Table 5.5.2 reveals that the highest amount per manday worked on providing welfare facilities was spent by the employers at the rate of Rs. 108.74 in industry group '232-Manufacture of refined petroleum products', followed by Rs. 77.15 in industry group '341-Manufacture of motor vehicles’.  Employers in industry group '014-Agricultural and animal husbandry services activities, except veterinary activities' spent the lowest amount of Rs. 1.63 per manday worked on welfare expenses. 

5.5     Percentage of components of Labour Cost to Total Labour Cost 

State-wise and Industry-wise detailed analysis of percentage of various components of labour cost, viz., (i) wages/salaries; (ii) bonus; (iii) contribution to provident and other funds, and (iv) workmen and staff welfare expenses, to total labour cost has been depicted in Tables 5.6.1 and 5.6.2, respectively. At the all India level, the percentage shares of different components of labour cost to total labour cost were 74.98 percent on wages/salaries, 4.31 percent on bonus, 13.40 percent on provident and other funds and 7.31 percent towards staff welfare expenses. 

Among States, the share of wages/salaries in the labour cost was highest at 95.25 percent in Manipur and lowest at 68.83 percent in Madhya Pradesh. As regards payment of bonus, its contribution to total labour cost was highest at 9.92 percent in Andaman & Nicobar Islands and the lowest at 1.14 percent in Chhattisgarh. The contribution to provident and other funds in total labour cost was the highest at 18.20 percent in Madhya Pradesh and the lowest at 1.66 percent in Manipur.  The highest percentage of staff welfare expenses as component of labour cost was reported in Goa at 13.16 percent and lowest at 1.88 percent in Manipur.    

Among industries, the percentage of salaries/wages to total labour cost was the highest at 91.50 percent in industry group '014-Agricultural and animal husbandry service activities, except veterinary activities' and lowest at Rs. 64.40 percent in the industry group ‘341-Manufacture of motor vehicles’. The percentage contribution of bonus in the total labour cost was highest at 11.37 percent in industry group '342-Manufacture of bodies for motor vehicles; manufacture of trailers and semi-trailers' and the lowest at 1.39 percent in industry group '351-Building and repair of ships & boats'. The percentage contribution of provident and other funds to total labour cost was highest at 25.39 percent in industry group ‘322–Manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy' and lowest at 3.61 percent in industry group ‘182-Dressing and dyeing of fur; manufacture of articles of fur'. The percentage share of staff welfare expenses in total labour cost was highest at 14.69 percent in industry group '241-Manufacture of basic chemicals' and lowest at 1.38 percent in industry group '014-Agricultural and animal husbandry services activities, except veterinary activities'. 

5.6     Percentage of Labour Cost to Total Cost of Production 

Labour cost is one of the main components of the total cost of production in any industrial establishment. The percentage of labour cost on workers to total cost of production indicates the share of the labour in an economy in a country. In the changing scenario of world economy in terms of liberalization, privatization, globalization and modernization, the percentage share of labour cost to total cost of production is bound to change over a period of time. The time series data on the percentage of labour cost to total cost of production may be of immense use in overall economic planning of labour policies and programmes. With this end in view, State-wise and Industry-wise data on percentage share of labour cost to total cost of production in different sectors have been presented in Tables 5.7.1 and 5.7.2, respectively. 

The Table 5.7.1 reveals that at all India level labour cost constituted 4.95 percent of the total cost of production during the year 2001-2002 in Census Sector. The percentage of labour cost to total cost of production was 6.70 percent in Public Sector, 4.64 percent in Joint Sector and 4.67 percent Private Sector. 

Among States, the highest percentage of labour cost to total cost of production was reported in West Bengal at 10.00 percent, followed by Jharkhand at 9.67 percent, Tripura at 9.26 percent and Andaman & Nicobar Islands at 9.01 percent. On the other hand, the lowest percentage of labour cost to total cost of production was reported at 1.17 percent in Dadra and Nagar Haveli.  The percentage of labour cost to total cost of production was reported to be more than 10 percent in only West Bengal. However, it was less than 3 percent in six States/Union Territories, viz., Himachal Pradesh, Meghalaya, Gujarat, Daman & Diu, Dader & Nagar Havali and Goa.  

Industry-wise and Sector-wise percentage of labour cost to total cost of production is presented in Table 5.7.2.  The highest percentage of labour cost to total cost of production was recorded at 37.46 percent in industry group '142-Mining and quarrying, n.e.c.' and the lowest at 0.75 percent in industry group '232-manufacture of refined petroleum products'.   

In Public Sector, the percentage of labour cost to total cost of production was the lowest at 0.80 percent in industry group '232-Manufacture of refined petroleum products' and the highest at 74.91 percent in industry group '323-Manufacture of television and radio receivers, sound or video recording or reproducing apparatus, and associated goods'.  In Joint Sector, the percentage of labour cost varied between a minimum of 0.78 percent in industry group '160-Manufacture of tobacco products' and a maximum of 45.33 percent in industry group '351-Building and repair of ships & boats'.  In Private Sector, the percentage of labour cost varied between a minimum of 0.26 percent in industry group ‘232-Manufacture of refined petroleum products’ and a maximum of 37.46 percent in industry group ‘142-Mining and quarrying, n.e.c.'. 

5.7         Percentage of Factories paying/incurring Expenses on Bonus, Provident Funds and Welfare Funds.       

State-wise and Industries-wise data on percentage of factories paying/incurring expenses on bonus, provident funds and welfare funds are given in Tables 5.8.1 & 5.8.2, respectively.  The Tables reveal that at the all India level, the percentage of factories incurring expenditure on bonus, provident funds and welfare funds was recorded at 81.35 percent, 89.59 percent and 85.95 percent, respectively. The percentage of factories paying bonus was recorded at 64.86 percent in Public Sector, 80.34 percent in Joint Sector and 82.29 percent Private Sector. The percentage of factories contributing towards the provident and other funds was recorded at 94.59 percent in Public Sector, 95.42 percent in Joint Sector and 89.09 percent Private Sector. The percentage of factories incurring expenditure on welfare of their workers was recorded at 93.37 percent in Public Sector, 94.75 percent in Joint Sector and 89.57 percent Private Sector. 

At the State level, the percentage of factories paying bonus to its workers was recorded lowest at 14.53 percent in Nagaland, followed by 18.42 percent in Manipur. The percentage of factories contributing to the provident and other funds was recorded lowest at 5.26 percent in Manipur, followed by 14.53 percent in Nagaland. Similarly, the percentage of factories incurring expenditure on welfare of its workers was lowest at 42.11 percent in Manipur, followed by 65.81 percent in Nagaland. 

Analysis of Table 5.8.2 shows that the highest percentage of factories incurring expenditure on Bonus was reported at 93.75 percent in industry group ‘312-Manufacture of electricity distribution and control apparatus' and the lowest at 22.06 percent in industry group '201-Saw milling and planning of wood'. Hundred percent of factories in three industry groups, viz., ‘182-Dressing and dyeing of fur; manufacture of articles of fur’, ‘223-Reproduction of recorded media’ and ‘353-Manufacture of aircraft and spacecraft’ were contributing to the provident and other funds of its workers.  Similarly, hundred percent of factories in four industry groups, viz., ‘223-Reproduction of recorded media’, ‘243-Manufacture of man-made fibres’, ‘341-Manufacture of motor vehicles’ and ‘353-Manufacture of aircraft and spacecraft', were incurring expenditure on welfare of its workers.