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 all employees 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 for all employees during the year 2002-2003 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 employees was Rs. 350.08. Out of this, the employers spent Rs. 261.97 on wages/salaries, Rs.13.54 on bonus, Rs. 46.40 on provident fund and Rs. 28.17 as welfare expenses for each manday worked by all employees. Average labour cost per manday worked in Public Sector was Rs. 585.62 as against Rs. 531.39 in Joint Sector and only Rs. 303.14 in 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 employees was reported at Rs. 592.16 in Chhattisgarh, followed by Rs.567.99 in Jharkhand and Rs. 556.11 in Uttaranchal, all the three States being newly created states. The lowest average labour cost per manday worked in respect of all employees was reported at Rs. 77.69 in Manipur, followed by Rs. 87.06 in Nagaland and Rs. 104.50 in Tripura, all the three States belonging to North-Eastern region of the country.

5.3  Average Labour Cost by Industries

     Analysis of Table 5.1.2 shows that the highest average labour cost per manday worked was reported at Rs. 1080.84 in the industry group ‘232–Manufacture of refined petroleum products’, followed by industry groups '341-Manufacture of motor vehicle' (Rs. 888.73), '353-Manufacture of aircraft and spacecraft' (Rs. 850.29) and '311-Manufacture of electric motors, generators and transformers' (Rs. 838.13). The lowest average labour cost per manday worked was reported at Rs. 75.08 in industry group '160-Manufacture of the tobacco products', followed by industry groups '201-Saw milling and planing of wood' (Rs. 87.65) and '014-Agricultural and animal husbandry service activities, except veterinary services'.

5.4  Percentage of Components of Labour Cost

State-wise and Industry-wise detailed analysis of percentage of various components of labour cost on Employee, viz., (i) wages/salaries; (ii) bonus; (iii) contribution to provident and other funds, and (iv) workmen and staff welfare expenses, to total labour cost on Employee has been depicted in Tables 5.2.1 and 5.2.2, respectively. At the all India level, the percentage shares of different components of labour cost to total labour cost were 74.83 percent on wages/salaries, 3.87 percent on bonus, 13.25 percent on provident and other funds and 8.05 percent towards staff welfare expenses.

Among States, the share of wages/salaries in the labour cost was highest at 96.17 percent in Manipur. Other two States where the share of wages/salaries in the labour cost was more than 90 percent are Nagaland (91.73 percent) and Meghalaya (91.03 percent). The share of wages/salaries in the labour cost was lowest at 59.04 percent in Bihar. For majority of the States/Union Territories, the share of wages/salaries in the labour cost was between 70 to 80 percent.

As regards payment of bonus, its contribution to total labour cost was highest at 6.81 percent in Pondicherry and the lowest at 0.80 percent in Chhattisgarh. The contribution to provident and other funds in total labour cost was the highest at 31.30 percent in Bihar and the lowest at 1.19 percent in Manipur.  The highest percentage of staff welfare expenses as component of labour cost was reported in Goa at 14.44 percent and lowest at 1.56 percent in Manipur.  

Among industries, the percentage of salaries/wages to total labour cost was the highest at 97.50 percent in industry group '372-Recycling of non-metal waste and scrap'. Other two industry groups contributing more than 90 percent of total labour cost towards wages/salaries are '182-Dressing and dyeing of fur; manufacture of articles of fur' (91.53 percent) and '014-Agricultural and animal husbandry service activities, except veterinary services' (90.85 percent). The percentage of salaries/wages to total labour cost was the lowest at Rs. 55.11 percent in the industry group ‘315-Manufacture of electric lamps and lighting equipment'. Other industry groups, where the percentage of salaries/wages to total labour cost was less than 70 percent, are '293-Manufacture of domestic appliances, n.e.c.' (62.46 percent), '311-Manufacture of electric motors, generators and transformers' (65.25 percent), '232-Manufacture of refined petroleum products' (67.71 percent) and '241-manufacture of basic chemicals' (68.13 percent).

The percentage contribution of bonus in the total labour cost was highest at 7.61 percent in industry group '191-Tanning and dressing of leather, manufacture of luggage handbags, saddlery & harness'. The industry group '372-Recycling of non-metal waste and scrap' neither paid any bonus to its employees nor contributed towards their provident fund. The percentage contribution of provident and other funds to total labour cost was highest at 36.43 percent in industry group ‘315–Manufacture of electric lamps and lighting equipment'. The percentage share of staff welfare expenses in total labour cost was highest at 14.55 percent in industry group '371-Recycling of metal waste and scrap' and lowest at 1.30 percent in industry group '014-Agricultural and animal husbandry services activities, except veterinary activities'.

5.5  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 Employees 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 5.3.1 and 5.3.2, respectively.

The Table 5.3.1 reveals that at all India level labour cost constituted 7.88 percent of the total cost of production during the year 2002-2003 in Census Sector. The percentage of labour cost to total cost of production was 11.03 percent in Public Sector, 7.19 percent in Joint Sector and 7.50 percent Private Sector.

Among States, the highest percentage of labour cost on employees to total cost of production was reported in Chandigarh at 21.79 percent, followed by Uttaranchal at 16.38 percent, Chhattishgarh at 15.39 percent and Andaman & Nicobar Islands at 14.34 percent. On the other hand, the lowest percentage of labour cost to total cost of production was reported at 2.69 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 11 States/Union Territories, viz., Jammu & Kashmir, Chandigarh, Uttaranchal, Delhi, Manipur, Tripura, West Bengal, Jharkhand, Orissa, Chhattisgarh and Andaman & Nicobar Islands.

Industry-wise and Sector-wise percentage of labour cost to total cost of production is presented in Table 5.3.2.  The highest percentage of labour cost to total cost of production was recorded at 41.15 percent in industry group '353-Manufacture of aircraft and spacecraft' and the lowest at 1.07 percent in industry group '232-Manufacture of refined petroleum products'. The percentage of labour cost to total cost of production was recorded more than 20 percent for 6 industry groups, whereas it was less than 5 percent for 8 industry groups.

In Public Sector, the percentage of labour cost to total cost of production was the lowest at 1.20 percent in industry group '232-Manufacture of refined petroleum products' and the highest at 81.86 percent in industry group '319-Manufacture of other electrical equipment, n.e.c.’.  In Joint Sector, the percentage of labour cost varied between a minimum of 1.81 percent in industry group '182-Dressing and dyeing of fur; manufacture of articles of fur' and a maximum of 81.34 percent in industry group '315-Manufacture of electric lamps and lighting equipment'.  In Private Sector, the percentage of labour cost varied between a minimum of 0.52 percent in industry group ‘232-Manufacture of refined petroleum products’ and a maximum of 37.24 percent in industry group ‘142-Mining and quarrying, n.e.c.'.

5.6  Wages/Salaries

State-wise and Industry-wise statistics on wages/salaries per manday worked are presented in Table 5.4.1 and 5.4.2, respectively.  The Tables reveal that at all India level, the wages/salaries per manday worked were Rs. 248.47 for men, Rs. 89.75 for women, Rs. 57.40 for child workers, Rs. 97.73 for contract workers, Rs.191.42 for all workers and Rs. 261.97 for all employees taken together. The wages/salaries per manday worked for all employees was highest at Rs. 426.09 in Public Sector, followed by Rs. 389.17 in Joint Sector and Rs. 229.17 in Private Sector. Four States/Union Territories, wherein wages/salaries paid to its employees was more than Rs. 400, are Jharkhand (Rs. 441.92), Chhattisgarh (Rs. 429.46), Uttaranchal (Rs. 421.13) and Chandigarh (Rs. 419.41). All these States, except Chandigarh, are newly formed States in the country.

The highest wages/salaries paid per manday worked to all workers was reported in Jharkhand at Rs. 402.28, followed by Uttaranchal at Rs. 335.36 and Chandigarh at Rs. 309.88. Among male workers, the highest wages/salaries paid per manday worked was reported at Rs. 437.63 in Jharkhand and the lowest at Rs. 70.74 in Manipur. Among women workers, the highest and lowest wages/salaries paid per manday worked was reported at Rs. 541.18 in Chhattisgarh and Rs. 49.84 in Nagaland, respectively.

At least in 7 States/Union Territories, viz., Chandigarh, Uttaranchal, Bihar, Meghalaya, Assam, Chhattisgarh and Andaman & Nicobar Islands, the average labour cost per mandays worked of women workers was higher than of their male counterpart.

Among Industries, the highest wages/salaries paid per manday worked to all workers was reported at Rs. 690.68 in industry group ‘353–Manufacture of aircraft and spacecraft’ and the lowest at Rs. 55.29 in industry group '160-Manufacture of the tobacco products'.

At least in 3 industries groups, viz., '152-manufacture of dairy product', '271-Manufacture of basic iron and steel' and '272-Manufacture of basic precious and non-ferrous metals', the average labour cost per mandays worked of women workers was higher than of their male counterpart.

5.7         Average Daily Earnings

The average daily earnings have been defined as the wages/salaries per manday paid for. State-wise and industry-wise statistics on average daily earnings of workers during the year 2002-03 are presented in Tables 5.5.1 and 5.5.2, respectively. The Tables show that at all India level, the average daily earnings were Rs. 221.36 by men, Rs. 82.97 by women, Rs. 55.15 by children, Rs. 96.69 by contract workers, Rs. 175.45 by all workers and Rs. 236.05 by all employees. At all India level, the average daily earnings by workers were reported at Rs. 309.33 in Public Sector, Rs. 274.31 in Joint Sector and Rs. 151.18 in Private Sector.

For male workers, the amount of average daily earnings was reported highest at Rs. 396.89 in Jharkhand and lowest at Rs. 70.71 in Manipur. The average daily earnings were highest at Rs. 463.96 for women workers in Chhattisgarh and at Rs. 146.68 for child workers in Andhra Pradesh.  Among all the State/Union Territories, the average daily earnings by contract workers were reported highest at 173.92 in Jharkhand and lowest at Rs. 51.24 in Nagaland.

     At the industry level, the highest average daily earnings for all workers was reported at Rs. 540.60 in industry group ‘353-Manufacture of aircraft and spacecraft’ and lowest at Rs. 54.01 in industry group ‘160-Manufacture of the tobacco products’.  For contract workers, the highest average daily earnings was reported at Rs. 226.44 in industry group ‘351- Building and repair of ships & Boats’ and lowest at Rs. 44.43 in industry group ‘160-Manufacture of the tobacco products’.

Average daily earnings for other category of employees by State and industry have been presented in Tables 5.6.1 and 5.6.2, respectively. For supervisory and managerial staff, the highest and lowest average daily earnings were reported at Rs. 1099.19 in Chandigarh and Rs. 168.58 in Manipur, respectively. For other staff, the highest and lowest average daily earnings were reported at Rs. 475.31 in Jharkhand and Rs. 96.42 in Nagaland, respectively. For all employees, the highest and lowest average daily earnings were reported at Rs. 406.20 in Jharkhand and Rs. 74.69 in Manipur, respectively. For all the directly employed workers, the highest and lowest average daily earnings were again reported at Rs. 394.71 in Jharkhand and Rs. 65.20 in Manipur, respectively.

At the industry level, the highest average daily earnings for all categories of employees were reported in the industry group '232-Manufacture of refined petroleum products'. The average daily earnings in this industry group were reported at the rate of Rs. 706.03 for directly employed workers, Rs. 1232.26 for supervisory and managerial employees, Rs. 694.66 for other staff and Rs. 639.16 for all employees. The lowest average daily earnings for directly employed workers, supervisory and managerial employees and other staff were reported in the industry group '201-saw milling and planing of wood' at the rate of Rs. 66.96, Rs. 130.37 and Rs.55.59, respectively. The lowest average daily earnings for all employees were reported in the industry group '160-Manufacture of the tobacco products' at Rs. 61.27.

5.8         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 5.7.1 & 5.7.2, 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 86.84 percent, 93.88 percent and 93.68 percent, respectively. The percentage of factories paying bonus was recorded at 69.49 percent in Public Sector, 76.26 percent in Joint Sector and 88.25 percent in Private Sector. The percentage of factories contributing towards the provident and other funds was recorded at 97.89 percent in Public Sector, 96.71 percent in Joint Sector and 93.54 percent in Private Sector. The percentage of factories incurring expenditure on welfare of their workers was recorded at 96.68 percent in Public Sector, 94.45 percent in Joint Sector and 93.49 percent Private Sector.

At the State level, the percentage of factories paying bonus to its workers was recorded lowest at 15.38 percent in Nagaland, followed by 17.95 percent in Manipur. The percentage of factories contributing to the provident and other funds was recorded lowest at 7.69 percent in Manipur, followed by 11.97 percent in Nagaland. Similarly, the percentage of factories incurring expenditure on welfare of its workers was lowest at 46.15 percent in Manipur, followed by 66.67 percent in Nagaland. All the factories in Himachal Pradesh and Chandigarh contributed to the provident and other funds of their employees. All the factories in Himachal Pradesh, Chandigarh, Uttaranchal and Dadra & Nagar Haveli incurred expenditure on welfare of its workers.

Analysis of Table 5.7.2 shows that all the factories in three industry groups, viz., ‘223-Reproduction of recorded media’, ‘353-Manufacture of aircraft and spacecraft’ and '371-Recycling of metal waste and scrap', incurred expenditure on Bonus to its employees. All the factories in 11 industry groups contributed to the provident fund and other funds of their employees. These industry groups are ‘182-Dressing and dyeing of fur; manufacture of articles of fur’, ‘223-Reproduction of recorded media’, ‘243-Manufacture of man-made fibres’, ’300-Manufacture of office, accounting and computing machinery’, ‘312-Manufacture of electricity distribution and control apparatus’, ‘315-Manufacture of electric lamps and lighting equipment’, ‘332-Manufacture of optical instruments and photographic equipment, ‘341-Manufacture of motor vehicles’, ‘351-Building and repair of ships & boats’, ‘353-Manufacture of aircraft and spacecraft’ and ‘371-Recycling of metal waste and scrap’. Similarly, all the factories in fifteen industry groups incurred expenditure on the welfare of its workers.

The percentage of factories incurring expenses on bonus, provident funds and staff welfare was lowest at 17.65 percent, 13.73 percent and 60.78, respectively, all in the industry group '201-Saw milling and planing of wood'.