INTERNATIONAL LABOUR OFFICE

PROBLEMS
OF WAGE POLICY
IN ASIAN COUNTRIES

GENEVA
1956

STUDIES AND EEPOETS
New Series, No. 43

PUBLISHED BY THE INTERNATIONAL LABOUR OFFICE
GENEVA, SWITZERLAND

Published in the United Kingdom for the INTERNATIONAL LABOUR OFFICE
by Staples Press Limited, London

PRINTED BY " L A TRIBUNE DE G E N È V E " , GENEVA (SWITZERLAND)

PEEFACE
This study is a revised version of a report prepared by the
International Labour Office for the Asian Regional Conference
of the International Labour Organisation held in Tokyo in
September 1953.
While this was the first time that the question of wage
problems had been included in the formal agenda of an Asian
Regional Conference, the preparatory Asian Regional Conference held at New Delhi in 1947 had adopted a resolution
concerning wage policy and family budget inquiries calling
attention to the need for improvement in the wage standards
in various industries and occupations, as well as the desirability
of standardising, as far as possible, in each country or area,
the wages in each industry or occupation where conditions
were similar. The resolution also stated that while collective
agreements were normally the most satisfactory means for
the adjustment of wages, various reasons, including the
comparative lack of organisation among employers and, to a
much greater degree, among workers in many of the Asian
countries, made it necessary for governments to take an
active part in the fixing and enforcement of fair wages. The
Conference accordingly requested the governments of Asian
countries to assist the conclusion of collective agreements and
to set up wage boards. It also called for studies by the International Labour Office of the working of collective agreements,
wage boards and industrial tribunals and of the further steps
which might be taken to secure fair wages for all workers. 1
Problems of wage policy in Asian countries were further
considered by the Asian Advisory Committee of the International Labour Organisation in 1950. The Committee was
in general agreement that increased productivity was a
paramount consideration in Asian countries ; that the immediate need was for a minimum wage structure which would
secure a reasonable living standard, from which should emerge,
1
The full text of the resolution is given in Official Bulletin
I.L.O.), Vol. X X X , No. 3, 15 Nov. 1947, p. 179.

(Geneva,

IV

WAGE POLICY IN ASIAN COUNTRIES

as the economy developed, proper living standards, including
a fair share for labour, through rising productivity ; and that,
in determining wage rates, the capacity of industry to pay
should be taken into account. The Committee also emphasised
the desirability of enacting minimum wage fixing legislation
and of establishing the necessary machinery in all Asian
countries where such action had not yet been taken. Finally,
the Committee attached the greatest importance to the
technical assistance which the International Labour Organisation could render in the field of wage policy, including the
establishment and operation of wage fixing machinery, and in
the field of methods of raising productivity.
The present report contains as an Appendix the text of
the resolution concerning wages adopted by the Asian Eegional
Conference (Tokyo, September, 1953). The report also takes
account of the conclusions reached in the various I.L.O.
meetings which have discussed problems of wage policy in
Asian countries. I t opens with a brief survey of the general
problem of income in Asia and then proceeds to analyse the
objectives of wage policy, the existing systems of wage regulation, problems which arise in the regulation of minimum
wages and the relation of the wage level to the needs and
progress of economic development. A final chapter briefly
recapitulates some of the main points discussed in the report.

CONTENTS

Page
PREFACE

m

CHAPTER I : The General Problem of Income in Asia

1

Some Basic Facts
The Occupation Structure
The Eole of Wage Earners
The Level of Income Per Head
The Distribution of Income
Wage Diflerences among Various Groups of Wage Earners .

1
1
3
8
10
16

The Basic Approach to Eaising Income
The Conflict between Capital Formation and Consumption .
Possible Lines of Action
Conclusions

28
28
33
37

CHAPTER I I : The Objectives of Wage Policy

39

Abolition of Malpractices in Wage Payment
The Fixing of Minimum Wages
Wages and Economic Development

40
43
46

CHAPTER I I I : Existing Systems of Wage Begulation

48

Protection of Wages

49

Machinery for Wage Determination
Minimum Wage Fixing
Conciliation and Arbitration in Wage Disputes

49
49
52

Scope and Methods of Wage Régulation
Coverage of the Laws
Factors To Be Considered in Determining the Level of Minimum Wages
Other Rules of Operation

57
57

Application of Wage Legislation
Minimum Wage Legislation
Wage Determination by Industrial Tribunals

61
61
69

CHAPTER IV : Problems of Minimum Wage Policy
The Question of Uniformity
Uniformity among Industries
Uniformity among Various Categories of Wage Earners . .

58
60

74
76
76
80

WAGE POLICY IN ASIAN COUNTRIES

VI

Page

The Level of the Minimum Wage
The Workers' Normal Needs
The Capacity to P a y Minimum Wages
The Effects of Wage Increases

84
85
87
90

Machinery for Minimum Wage ^Regulation
The Fixing of Minimum Wages
Machinery for Inspection and Enforcement

107
107
109

CHAPTER V : Wage Policy and Economic Development

112

The Adjustment of the Level of Wages to the Progress of Economic
Development.

112

Unemployment, Capital Shortage and the Wage Level . . . .

113

Wages, Economic Development and Inflation

117

Profit-Sharing

119

The Wage Structure and Economic Development
Systems of Payment by Eesults
The Adjustment of Wages to Changes in the Cost of Living . . .

122
123
126

CHAPTEE V I : Conclusions

128

The Content of Minimum Wage Eegulation

129

Inspection and Enforcement

131

Wage Policy and Economic Development : The Problem of Coordination
132
The Problem of the Supply of Essential Consumers' Goods . . .

133

APPENDIX : Besolution concerning Wages Adopted by the Asian Begional Conference of the International Labour Organisation (Tokyo, September 1953)

135

INDEX

137

CHÁPTEE I
THE GENERAL PROBLEM OF INCOME IN ASIA
The present chapter sketches the general economic background against which the problems of wage policy in Asian
countries must be considered. I t consists of two parts. The
first presents certain basic facts regarding the income and
employment of the Asian working population. A brief survey
of these facts should help to make clear the kind of wage
policy most needed in these countries and give some indication
of the role that wage policy as such might be expected to play
in raising the living standards of the working population.
The second part considers the problem of the allocation of
resources between capital formation and consumption which
confronts Asian countries in their effort to accelerate economic
development. The question, is clearly of central importance
for determining the appropriate levels of wages and the rates
at which they might be increased in these countries in the
years immediately ahead.
SOME BASIC FACTS

In order to obtain the broad perspective necessary for the
discussion of wage policy, an attempt is made below to bring
together certain basic facts about (a) the occupation structure
of the working population, (b) the role of wage earners, (c) the
level of income per head, (d) the distribution of income and
(e) the wage differences among various groups of wage earners.
The Occupation Structure
The central feature of the occupation structure of the
working population in Asia is the predominance of agriculture
and the small proportion engaged in manufacturing activities.
Table I gives the percentage distribution of the working
population in 12 Asian countries classified according to the

2

WAGE POLICY IN ASIAN COUNTRIES

three broad divisions of production : primary, secondary and
tertiary. 1 Although these figures may involve a substantial
margin of error, they at least tend to show that in all these
countries primary production absorbs by far the largest
number of people and that tertiary production is numerically
far more important than secondary production. The only
notable exception to this general pattern is Japan, where the
proportion engaged in secondary production is considerably
higher, and in primary production lower, than in other countries in the region. By way of comparison, the occupational
distribution in the United States in 1950 showed 12.5 per cent.
of the working population in primary production, 37 per cent.
in secondary and 50.5 per cent, in tertiary.

TABLE I.

PERCENTAGE DISTRIBUTION OF THE WORKING
POPULATION IN ASIAN COUNTRIES

Country
Burma . .
Ceylon . .
China 1 . .
India2 . .
Indo-China
Indonesia :
Java . .
Rest . .
Japan . .
Korea . .
Malaya . .
Pakistan .
Philippines
Thailand .

Year

Primary
production

Secondary
production

Tertiary
production

1931
1946
1931
1931
1930

69.0
53.0
70.0
67.3
71.0

14.0
10.4
10.0
10.5
—

17.0
36.6
20.0
22.2
—

1930
1930
1950
1930
1947
1951
1948
1947

71.7 3
81.9 3
47.5
78.0 3 <
64.5
77.5
65.6
88.5

12.8
8.5
20.9
6.0
9.2
7.0
8.1
1.9

29

16.0
9.6
31.6
16.0
26.3
15.5
26.3
9.6

Sources : Japan, Malaya, Pakistan, the Philippines and Thailand—I.L.O. : Year
Book of Labour Statistics 1954 (Geneva, 1954), pp. 21-23 ; India—idem : Year Book of
Labour Statistics 1951-52 (Geneva, 1952), p. 17 ; Burma, China, Indonesia and Korea—
Colin CLARK : The Conditions of Economic Progress, 2nd ed. (London, MacMillan and Co.
Ltd., 1951), p. 399 ; Ceylon—Government ol Ceylon, Ministry of Finance : Economic and
Social Development of Ceylon, 1926-1950 (Colombo, Government Press, 1951), p. xlii ;
Indo-China—League of Nations : Industrialization and Foreign Trade (1945), p. 27.
1
Excluding women attributed to agriculture. ! Covering former British India, the
Indian States and Burma. " Including mining. « Had fallen to 75 per cent, by 1936.
1
Primary production includes agricultural and pastoral production,
fishing, forestry and hunting. Secondary production covers mining, manufacturing, huilding construction, public works and public utilities. Tertiary
production consists of all other economic activities, the principal of which
are distribution, transport, public administration, domestic service and all
other activities producing a non-material output.

THE GENERAL PROBLEM OF INCOME IN ASIA

3

The Role of Wage Earners
One characteristic of the working population in Asia
particularly relevant to the question of wage policy is that
the majority of the working population are self-employed.
The proportion of wage earners is considerably smaller than
in the economically advanced countries. According to recent
estimates salaried employees and wage earners, taken together,
form 40 per cent, and 38 per cent, of the total working population in the Philippines and Japan respectively. For purposes
of comparison it may be cited that the corresponding percentages are 91 in the United Kingdom, 82 in the United
States and New Zealand, 77 in Australia, 75 in Sweden, 72
in Denmark, 65 in France and 50 in Italy. Leaving out
salaried employees, wage earners alone form only 28 per cent.
in the Philippines as compared with 53 per cent, in Denmark.
In India in 1931 it was estimated that about 36 per cent, of
the population engaged in all occupations depended on wage
labour as a means of livelihood. 1 In other Asian countries,
although similar estimates are at present not available, it
can safely be said that because of the preponderance of smallscale family enterprises the volume of wage-earning employment is also much smaller than that of self-employment.
For most Asian countries there are no accurate statistical
data to show the distribution of wage-earning employment
either among the three broad divisions of production or within
each of these divisions. As a background for the consideration of
wage policy the following observations can, however, be made :
(1) In some Asian countries the majority of wage earners
are agricultural workers. In India it was estimated that, of
a total of 56.5 million wage earners in 1931, 31.5 million or
56 per cent, were agricultural labourers. 2 In the Philippines
the corresponding percentage for 1948 was 65. 3 In Burma and
Ceylon, although the figures are not available as a percentage
of the total number of wage earners, agricultural wage earners
are known to form, numerically, the largest single class of
1
In India in 1931 the total number of wage earners came to about
56.5 million out of 156 million persons engaged in all occupations. (See
Kadhakamal MTJKERJEE : The Indian Working Glass, 3rd ed. (Bombay,
Hind Kitabs Ltd., 1951), p. 2.
2
The Indian Working Class, loc. cit.
3
Figure computed from I.L.O. : Year Book of Labour Statistics 1951-52
(Geneva, 1952), p. 32.

4

WAGE POLICY IN ASIAN COUNTEIES

the rural working population. 1 The situation in other Asian
countries is less clear owing to the absence of adequate data.
Only in Japan is there definite evidence that agricultural
wage earners as a class are relatively unimportant. 2
Among the agricultural wage earners in South-East Asia
a distinction must be made between those employed on
subsistence farms and those employed on plantations. The
distinction is, however, not always clear, because in certain
areas the same wage earners may work both on subsistence
farms and on plantations at different seasons. Another difficulty in ascertaining the relative importance of these groups
of agricultural wage earners lies in the instability of plantation
employment, which tends to fluctuate markedly between years
of prosperity and years of depression. Eecent information
gathered by the I.L.O. gives the following figures on plantation
employment in some of the Asian countries : in India, tea,
coffee and rubber plantations together employ about 1,150,000
workers ; in Ceylon, tea and rubber plantations, about 620,000 ;
in Indonesia, rubber, tea, sugar and coffee plantations, about
785,000 ; in Malaya, rubber plantations, about 288,000 ;
in the Philippines, sugar plantations, about 217,000.3 In
India the number of plantation workers is fairly small compared
with the number of wage earners employed on subsistence
farms. In other countries in South-East Asia the data available
are not sufficient for statistical comparison. Nevertheless, in
the light of the structure of their agrarian economies it might
be a reasonable conjecture that, as a class, wage earners in
subsistence agriculture are probably more numerous than
plantation workers in Ceylon and the Philippines and vice
versa in Indonesia and the Federation of Malaya.
1
In Burma in 1931 agricultural labourers represented 40 per cent, of
the agricultural working population, whereas cultivating owners and tenantcultivators formed respectively 37 per cent, and 23 per cent. (See J. Russell
ANDKUS : Burmese Economic Life (Stanford, California, Stanford University
Press, 1948), p. 40.)
In Ceylon a recent rural survey shows that of the agricultural families
investigated " 48 per cent, were dependent on agricultural labour, 32 per
cent, on owner-cultivators, 17 per cent, on tenant-cultivators and 3 per cent.
on landlords of agricultural holdings ". (See Government of Ceylon, Department of Census and Statistics : Preliminary Report on the Economic Survey
of Rural Ceylon, 1950 (Colombo, 1951), p . 10.)
2
In Japan in 1950 agricultural salaried employees and wage earners
formed about 7.5 per cent, of the total number of salaried employees and
wage earners. (See Tear Boole of Labour Statistics 1951-52, op. cit., p . 18.)
3
Basic Problems of Plantation Labour, International Labour Organisation, Committee on Work on Plantations, First Session, Bandung, 1950
(Geneva, I.L.O., 1950), p. 22.

THE GENERAL PROBLEM OP INCOME IN ASIA

5

(2) As far as secondary production is concerned, the most
significant fact is the small volume of factory employment.
In nearly all Asian countries, except India, China and more
particularly Japan, modern factory industries using motive
power are still in the stage of infancy ; the number of wage
earners employed in these industries accounts for only a small
fraction of the total volume of wage-earning employment.
Even in India at its wartime peak in 1944 the number employed in industrial establishments was only about 2.6 million;
it fell to 2.3 million in 1947 and by 1951 had recovered to 2.5
million only. 1 When this figure is compared with a total of
56.5 million wage earners and with approximately 25 million
non-agricultural wage earners in India in 1931, it will be
readily seen that the role played by modern factory industries
in creating wage-earning employment has so far been extremely
limited. Employment in registered industrial establishments
using mechanical aids or employing at least 50 workers in
Indonesia in 1951 was estimated at 551 thousand. 1 In pre-war
China it was estimated that modern factories employed no
more than 1 million workers. 2 In Japan of a total of 13.9
million salaried employees and wage earners in 1950, about
4.4 million, or approximately 32 per cent., were engaged in
manufacturing which, however, covers also handicraft and cottage industries. 3 Although no estimate is available showing
the proportion of wage earners employed in modern factories,
it must be considerably higher in Japan than in other Asian
countries.
Manufacturing activity in most Asian countries is still
carried on mainly in the traditional handicraft or cottage
industries. The number of persons engaged in those industries
is far greater than the number of factory workers. In pre-war
China the number of handicraft workers was estimated at
10 million. 2 In India it has been estimated on the basis of
census figures that in 1931 there were 6.1 million persons
1
United Nations, Department of Economic and Social Affairs : Processes and Problems of Industrialization in Under-Developed Countries (New
York, 1955), p . 135. The expression " industrial establishments " in this
source excludes public utilities, mining, building and transportation enterprises.
2
Pao-san Ou and Foh-shen WANG : " Industrial Production and
Employment in Pre-War China", in Economic Journal (London, Royal
Economic Society), Vol. LVI, Sep. 1946, pp. 428-429.
3
I.L.O. : Year Book of Labour Statistics 1954 (Geneva, 1954), p . 20.

6

WAGE POLICY IN ASIAN COUNTRIES

engaged in cottage industries as against 1.5 million workers
in large-scale industries. 1 What is of special relevance for wage
policy is, however, not so much the number of persons engaged
in these industries as the number of wage earners employed.
On this point statistical data are practically non-existent.
Generally speaking the relative importance of wage-earning
employment is likely to differ greatly in different cottage
industries and possibly in different localities, even for the same
industry. In some cases the producing unit consists only of the
proprietor and members of his own family ; in others a few
workers are also hired ; in still other cases the owner may
employ a hundred workers or more. 2 Furthermore, certain
cottage industries are so organised that the workers usually
work in their homes for wages paid on a piece-rate basis by
merchants or middlemen who supply them with materials and
sell their products. I n view of the complexity of the employment situation, there seems to be a need for thorough investigation in this much neglected field. In India, at the instance of
the All-India Cottage Industries Board in 1950, a pilot survey
was conducted of the cottage industries of the Aligarh-Harduaganj area. The survey disclosed that more than half of the
total number of persons employed in the cottage industries in
the urban area were paid workers, the balance being proprietors
and their dependants ; the same proportion applied in the rural
area. It is interesting to note that in the urban area, while the
lock manufacturing, moulding and many other industries
hired a large number of workers and paid substantial sums in
wages, in the weaving, earthenware and Sirici Khas-lci-Tatti
industry there was not a single hired labourer. 3 In the case
of the hand-weaving industry, the absence of hired labour does
not necessarily mean that the workers employed in the industry
were independent weavers. It has been observed that in
1
The Economic Background of Social Policy Including Problems of
Industrialisation, Report IV, International Labour Organisation, Preparatory Asian Regional Conference, New Delhi, 1947 (New Delhi, I.L.O., 1947),
p. 57.
2
Cf. Labour Policy in General Including the Enforcement of Labour
Measures, Report II, International Labour Organisation, Preparatory
Asian Regional Conference, New Delhi, 1947 (New Delhi, I.L.O., 1947),
pp. 17-18.
3
" Pilot Survey in Aligarh-Harduaganj Area ", in Journal of Industry
and Trade (New Delhi, Ministry of Commerce and Industry), June 1952,
Special Cottage Industries Number, pp. 675-676. Sirici Khas-ki-Tatti is a
handicraft industry in India which makes fibre screens used in homes for
protection against heat.

THE GENERAL PROBLEM OF INCOME IN ASIA

7

India " formerly each weaver was an independent worker but
today . . . the great majority of them work for a wage under
a master-weaver, mahajan or Icarhhanadar ", 1 Although the
employment situation in the handicraft or cottage sector of
the economy tends to vary in different Asian countries and
adequate information is not available, there is a strong presumption that a considerable proportion of non-agricultural
wage earners in these countries is employed in this sector.
(3) Among the numerous occupations falling within the
division of tertiary production the two largest groups are
commerce and services. The relative importance of wageearning employment, however, differs greatly in these two
groups. In commerce the majority of workers are self-employed. In services, on the other hand, most of the workers
are wage earners. Por instance in Japan and the Philippines,
for which recent data are available, while the group " salaried
employees and wage earners " constitutes 40 per cent, and
43 per cent, of the total working population engaged in commerce, the figures for the same group are respectively 75 per
cent, and 98 per cent, in services.2 In most Asian countries
the kind of services which provide most wage-earning
employment are personal services, particularly private domestic service. An analysis of the available data on occupational distribution of non-agricultural working population
shows that in terms of the size of labour force employed (including both wage earners and the self-employed) " personal
services " was the largest single non-agricultural occupation in
Korea and the second largest in Ceylon, India, the Philippines,
and Thailand. 3 In India, according to the 1931 census, there
were then about 11 million wage earners in domestic service as
compared with a total of about 15 million persons (including
both wage earners and the self-employed) engaged in industrial
manufacturing (cottage industries and factories combined)
and construction. In Japan (1950) and Malaya (1947), where
separate numbers for " personal services " were not given,
" services " as a whole also constituted the second largest
non-agricultural occupation. 4
1
Government of India : Beport of the Fact-Finding Committee (Handloom and Mills) (Calcutta, 1942), p. 35.
2
Tear Booh of Labour Statistics 1954, op. cit., pp. 20-23.
3
The sources of data for this analysis are the same as those for table I.
4
Year Book of Labour Statistics 1964, op. cit., p. 21.

8

WAGE POLICY IN ASIAN COUNTRIES

The above observations regarding the role of wage earners
in Asian countries may now be briefly recapitulated. In the
first place wage earners form a much smaller proportion of the
total working population in these countries than in the economically advanced countries. Secondly, in most Asian countries
by far the largest part of wage earners are engaged in agriculture. Among the agricultural wage earners, except in one or
two countries, the number employed on subsistence farms
seems to be far greater than the number employed on plantations. Thirdly, in secondary production the volume of wageearning employment provided by modern factory industries
is relatively very small. On the other hand a considerable
proportion of wage earners seem to be employed in the handicraft and cottage industries, and in some of these industries
such as the Indian hand-weaving industry the ratio of wage
earners to the self-employed has been steadily increasing as a
part of the secular change in the structure of the industry.
Finally, in tertiary production the largest single group of
wage earners is found in personal services, particularly in
private domestic service.
The Level of Income per Head
In Asia the central economic fact is the low average productivity of the working population. Because productivity is
so low, real income per head is among the smallest in the world.
On a regional basis it has been estimated that in 1950 Asia,
with about half of the world's population, produced about
10 per cent, of the world's income. 1 Table I I gives figures of
income per head in United States dollars in 1949 in ten Asian
1

United Nations, Department of Social Affairs : Preliminary Beport
on the World Social Situation (New York, 1952), p. 131.
Clark has recently made the following estimates of real product per head
of population for certain Asian countries measured in " oriental units ",
defined as the quantity of goods and services exchangeable directly or indirectly for one rupee in India in 1948-49 :
China (1929-33)
173
India (1948-49)
191
Philippines (1939)
294
Ceylon (1947)
306
Indonesia (Java) (1938)
321
Japan (1919)
322
(See Colin CLARK : " The Measurement of Real National Incomes of
Under-Developed Countries ", in Review of Economic Progress (Brisbane),
Vol. 4, Nos. 2 and 3, Feb.-Mar. 1952, p . 8.)

THE GENERAL PROBLEM OF INCOME IN ASIA

9

countries, in comparison with the corresponding figures in ten
selected economically developed countries. Great caution
needs to be exercised in comparing these figures : they are
subject to a wide margin of error and, furthermore, do not
take into full account the differences in prices and cost of living.
Nevertheless, even if allowances are made for the inadequacies
in the methods of estimation, these figures still suggest a rough
quantitative notion of the glaring disparities between the
average standard of living in Asian countries and that in
economically developed countries.
TABLE II. INCOME PEE. HEAD IN TEN ASIAN COUNTRIES AND TEN
ECONOMICALLY DEVELOPED COUNTRIES, 1 9 4 9
(United States dollars)1
Asian countries

Indonesia
Pakistan

Income

36
67
27
57
25
100
35
51
44
36

Other selected countries

United States

United Kingdom

Belgium

. . .

Income

1,453
870
856
849
780
773
689
679
587
582

Source : Statistical Office of the United Nations : Nalional and Per Capita Incomes of
Seventy Countries in 1949 Expressed in United Slates Dollars Statistical Papers, Series E ,
No. 1 (New York, Oct. 1950), p p . 14-16.
1
The conversion of income in national currency into United States dollars of 1949
was m a d e a t t h e 1938 exchange r a t e adjusted for relative changes in cost of living between
1939 and 1949 in the United States and in the country in question.

The poverty of Asia is an obvious phenomenon requiring no
elaborate evidence to prove its existence. Here it may suffice
to adduce certain facts indicating the low average standard of
food and fibre consumption in the region. According to a
recent estimate, food supplies in Asia and the Far Bast in
1950-51 represented an average of only 1,950 calories per
person per day, compared with an average of over 3,000 calories
in Western Europe, ÌTorth America and Oceania. Total
proteins averaged 54 grammes per day as against 69 grammes
in Latin America, 86 in Western Europe, 92 in the United States
and Canada and 99 in Oceania. 1 The annual consumption, per
1
United Nations, Department of Economic Affairs : Recent Changes
in Production, Supplement to World Economic Report, 1950-51 (New York,
Apr. 1952), pp. 57-60.

10

WAGE POLICY IN ASIAN COUNTRIES

head, of major apparel fibres (cotton, wool and rayon) in Asia
in 1950 amounted to 1.5 kilogrammes as compared with a
world average of 3.8 kilogrammes. 1 In respect of other essential consumers' goods and services, the differences in supply
per head are even greater. A more disturbing fact is that the
present average standard of living in many Asian countries is
even lower than before the war as a result of the failure of
production to catch up with the increases in population. The
disparities between the average standards of living in Asia
and the economically developed areas have consequently been
widening.
As the income and living standards of the working population in Asia are limited by the amounts of goods and services
that they can produce, it appears clear that the basic way of
raising their income and living standards must be to expand
the volume of total national output as rapidly as possible and,
above all, more rapidly than the increase in population. This
is the primary aim of economic development. It should,
however, be noted at this stage that different methods of
promoting economic development may have very different
effects on workers' incomes and living standards in the course
of development. The issues involved will be discussed at some
length in the second part of this chapter.
The Distribution of Income
The facts about average real income or consumption do
not, however, by themselves provide an adequate indication
of the material welfare of the majority of the population.
This depends also on the distribution of income. 2 Given the
1
Food and Agriculture Organisation : Per Caput Fiber Consumption Levels,
Commodity Series, Bulletin No. 21, Supplement No. 1 (Kome, 1952), pp. 4-5.
2
In this connection attention may be drawn to the following challenging
statement made recently by an eminent economist :
" Were I to insist, however, that the reduction of mass poverty be
made a crucial test of the realisation of economic development, I would be
separating myself from the whole body of literature in this field. In all the
literature on economic development I have seen, I have found not a single
instance where statistical data in terms of aggregates and of averages have
not been treated as providing adequate tests of the degree of achievement
of economic development. I know, moreover, of no country that regards
itself as underdeveloped and that assembles the necessary statistical data to
discover whether or not the growth in aggregate national wealth and in
per capita income are associated with a decrease in the absolute or even the
relative extent to which crushing poverty prevails."
(Translated from the Portuguese version of the sixth lecture on the
theory of international trade delivered by Professor Jacob VINER at the

(Footnote continued

opposite)

THE GENERAL PROBLEM OP INCOME IN ASIA

11

same average income, the more unequal is the distribution of
income the lower will be the level of material welfare of the
majority of the population. Where marked inequality of
income distribution exists, it should be possible to promote
the material welfare of the lower income groups not only by
expanding the volume of total national output but to some
extent also by achieving a more equal distribution of income.
I t should, however, be borne in mind that a redistribution of
income, if it is to be effective at all, should be accompanied by a
corresponding shift in the pattern of output. For example,
if those whose incomes fell reacted by reducing their " conspicuous consumption " (such as the employment of large staffs of
domestic servants) while those whose incomes were raised
wished to spend their extra income on food, unless food
production could be expanded rapidly the result of the redistribution might well be a fall in total real income, namely in
the sector of domestic services, and a rise in food prices, without
any significant benefit to the lower income groups.
In most countries, to achieve this objective, main reliance
has so far been placed on transfer of income from the rich to
the poor by means of fiscal policy, that is by taxation and by
public spending for the benefit of the poor. Another instrument might be a wage policy designed to ensure an increase
in the share of national income going to wages rather than
profits. In appraising the final incidence of such policies it is,
however, necessary to consider the secondary repercussions
they may entail, for example, on incentives to workers and
investors, on the rate of capital accumulation and on the level
of employment. These problems will be examined later in this
report in so far as they relate to wage policy.
Before considering the extent to which the material welfare
of the majority of the Asian population might be improved by
a more equal distribution of income, it is essential first to
know something about the actual income distribution in those
countries. Unfortunately the lack of adequate statistical data
in this field makes a factual analysis peculiarly difficult.
Nevertheless, on the basis of general observation and economic
reasoning, a hypothesis may be advanced to the effect that in
National University of Brazil in July and August 1950 and published in
Revista Brasileña de Economia, Vol. 5, No. 2, June 1951, pp. 181-204, with
an English summary, pp. 204-214.)

12

WAGE POLICY IN ASIAN COUNTRIES

an agricultural economy where productivity does not rise and
there is increasing population pressure on the land and little
enterprise for industrial development, the income distribution
is likely to be highly unequal and tends to become more so
with the passage of time. There are several economic forces
working in that direction. First, the increasing population
pressure on land will in the course of time lead to an increasing
concentration of land ownership together with a secular rise
in agricultural rent. 1 Secondly, because of the increasing
poverty due to population pressure, the proportion of the
agricultural population resorting to distress-borrowing becomes
greater and greater. This imperative demand for cash keeps
on pushing up the rate of interest and gives rise to usury. As a
result the share of total agricultural income going to the small
class of landlords and money-lenders continues to increase,
and the share that is available for distribution among the
majority of the agricultural population continues to fall. This
process also explains why in several Asian countries an increasing part of the agricultural population has sunk to the
status of agricultural wage earners.
Statistical data relating to China and India in the 1920s
and 1930s seem to suggest, for instance, that the distribution
of income in these countries was then highly unequal. In China
a survey of landholding distribution on the mainland made
by the China Eural Economy Besearch Institute in 1936
showed that 4 per cent, of the farming population held about
50 per cent, of the cultivated land, while 70 per cent, of
the farming population held only 17 per cent, of the land. 2
1
The process may be briefly described as follows : as a result of the
continuous growth of agricultural population and the repeated subdivision
of holdings, the average amount of land owned per family tends to decrease
steadily. As the income from their own land falls, the majority of agricultural
families will find it increasingly necessary to rent additional land from others
in order to maintain their income. The total amount of cultivated land being
limited, the increasing demand for land will bring about a secular rise in
agricultural rent. Purchase of land will then become an increasingly profitable outlet for the savings of the wealthy. At the same time, because of
the deterioration of their economic position, a growing number of agricultural families will find it necessary to sell their land in order to obtain
cash to meet their pressing consumption needs. Land ownership will therefore gradually pass from the cultivators to more wealthy people. Some of
these new owners, by investing their entire fortune in land, will become
entirely dependent on income from rent and will then form a distinct social
class as landlords.
2
Agricultural Wages and Incomes of Primary Producers, Keport IV,
International Labour Organisation, Asian Kegional Conference, Nuwara
Eliya, Ceylon, 1950 (Geneva, I.L.O., 1949), p . 23.

THE GENERAL PROBLEM OP INCOME IN ASIA

13

In India, an estimate of the distribution of the national
income according to income groups in the 1920s was attempted by two economists. The results of their investigation
were that—
More than a third of the wealth of the country is enjoyed
by about 1 per cent, of the population, or allowing for dependants
about 5 per cent, at the most ; that shghtly more than another third,
about 35 per cent, of the annual wealth produced in the country, is
absorbed by another third of the population allowing for dependants ;
while 60 per cent, of the people of Provincial India get about 30 per
cent, of the total wealth produced in the country. This means that
for the 60 per cent., or majority, of the population any gross figure
of the average national income per head must be exactly halved to
represent what it actually gets.1
More recent data on income distribution are available for
Ceylon, Japan and the Philippines. These data are reproduced
in table I I I . In the case of Ceylon and the Philippines, however,
it is not clear what methods of estimation were used or what
the data cover, since the studies which contain these data were
inaccessible at the time of writing. In the case of Japan the
data are known to refer to taxable income of entrepreneurs
only, with a coverage of about 7.6 million persons. According
to the table, in Ceylon the upper 10 per cent, of income
receivers received 33.3 per cent, of the total income, while
the lowest 10 per cent, received 1.5 per cent, of the total
income ; in the Philippines the upper 10.6 per cent, of income
receivers received 32 per cent, of total income, while the
lowest 39.4 per cent, received about 15 per cent, of the total
income.
A statistical comparison of these data with similar data
for the United States in 1949 shows that, as compared with
the United States, the distribution was shghtly less unequal
in the Philippines and somewhat more so in Ceylon.2 Direct
comparison does not, however, give a true picture and the
observations that follow are equally applicable to the figures
in table I I I .
1
K. T. SHAH and K. J. KHAMBATTA : Wealth and Taxable Capacity of
India (1924), p. 307, quoted by S. CHANDRASEKHAR : India's Population :
Facts and Policy (New York, John Day Co., 1946), p. 54.
2
The concentration ratios, or coefficients of inequality, as calculated
from the Lorenz curves, are : Ceylon 42, United States 40, Philippines 39,
Japan 34. (See Economic Bulletin for Asia and the Far Fast (Bangkok,
united Nations), Vol. I l l , Nos. 1-2, Jan.-June 1952, p. 24.

14

WAGE POLICY IN ASIAN COUNTRIES
TABLE H I .

INCOME DISTRIBUTION IN CEYLON, JAPAN
AND THE PHILIPPINES
Percentage of income
receivers

Percentage of total
income

Income range
simple

cumulative

simple

cumulative

10
10
10
10
10
10
10
10
10
10

10
20
30
40
50
60
70
80
90
100

1.5
3.6
4.7
5.4
6.2
7.6
9.4
12.4
15.9
33.3

1.5
5.1
9.8
15.2
21.4
29.0
38.4
50.8
66.7
100.0

10
10
10
10
10
10
10
10
10
10

10
20
30
40
50
60
70
80
90
100

2.9
4.3
5.6
6.4
7.4
8.4
10.1
12.0
15.3
27.6

2.9
7.2
12.8
19.2
26.6
35.0
45.1
57.1
72.4
100.0

39.4
32.7
17.3
9.0
1.2
0.4

39.4
72.1
89.4
98.4
99.6
100.0

14.9
27.5
25.6
22.2
5.7
4.1

14.9
42.4
68.0
90.2
95.9
100.0

Ceylon (Dee. 1950) :
(rupees per jnonth)

0
26
36
46
57
69
83
103
138

to
to
to
to
to
to
to
to
to

26
36
46
57
69
83
103
138
198

Japan (1949) :
(thousand yen per year)

0 to
42 to
55 to
69 to
81 to
94 to
112 to
134 to
165 to

42
55
69
81
94
112
134
165
218

Philippines (1948) :
(pesos per year)

0
600
1,080
1,800
3,600
6,000

to 600
to 1,080
to 1,800
to 3,600
to 6,000
and over

Source : Economic Bulletin for Asia and the Far East (Bangkok, United Nations),
Vol. Ill, Nos. 1-2, Jan.-June 1952, p. 22, and the sources there quoted.

Writing of studies of the distribution of family income in
India in 1949-50, Ceylon in 1950 and Puerto Rico in 1948,
Kuznets in a recent article concludes that—
While the coverage is narrow and the margin of error wide, the
data show that income distribution in these underdeveloped countries

THE GENERAL PROBLEM OF INCOME IN ASIA

15

is somewhat more unequal than in the developed countries during
the period after the Second World War. Thus the shares of the
lower three quintiles are 28 per cent, in India, 30 per cent, in Ceylon,
and 24 per cent, in Puerto Eico—compared with 34 per cent, in
the United States and 36 per cent, in the United Kingdom. The
shares of the top quintile are 55 per cent, in India, 50 per cent, in
Ceylon, and 56 per cent, in Puerto Eico, compared with 44 per cent.
in the United States and 45 per cent, in the United Kingdom.
This comparison is for income before direct taxes and excluding
free benefits from governments. Since the burden and progressivity
of direct taxes are much greater in developed countries, and since
it is in the latter that substantial volumes of free economic assistance
are extended to the lower-income groups, a comparison in terms of
income net of direct taxes and including government benefits would
only accentuate the wider inequality of income distributions in the
underdeveloped countries.1
A knowledge of the inequality of income distribution is
essential for the framing of any general policy of income
redistribution, especially through fiscal measures. Inasmuch
as it is attempted, for example through minimum wage
regulation, to improve wage standards in particular industries
it is, moreover, desirable to ascertain the actual levels of net
profits earned in such industries in relation to the levels of
wages paid to the workers. The relationship between wages
and profits is likely to vary significantly among different
industries and among different firms within the same industry.
In some cases low wages may be accompanied by equally low
net profits ; in other cases where wages are low the net profits
earned by the industry may be exceedingly high. The extent
to which profits can be shifted to wages, therefore, may vary
greatly from industry to industry. Factual investigation in
this field presents a host of complicated problems in methodology as well as interpretation. In most Asian countries such
investigation has not yet been attempted, and there exist few
data to throw light on this question. In India, however, the
United Provinces Labour Enquiry Committee recommended
the fixing of minimum living wages in the province and also
certain specific minimum wage rates for different categories of
workers. In appraising the capacity of industries to pay these
minimum wages, the Committee undertook a detailed investigation of the financial position of nine organised industries in
the province, namely cotton textiles, hosiery, jute, sugar,
leather, oil, engineering and electrical supplies and glass. The
1
Simon KUZNETS : " Economic Growth and Income Inequality ", in
American Economic Review, Vol. XLV, No. 1, Mar. 1955, pp. 20-21.

16

WAGE POLICY IN ASIAN COUNTRIES

results of this investigation led to the conclusion that " most
industries are in a position to bear the additional burden
thrown on them by our proposals in respect of minimum wages,
dearness allowance and bonus. The only industries which
appear to be in somewhat straitened circumstances were jute
and leather." l
Wage Differences among Various Groups of Wage Earners
The general level of real wages in any country is limited
by the country's capacity to produce, of which the size of
output and income per head is a generally accepted indicator.
In the countries of Asia, where output and income per head
are so small, it is inevitable that the general level of wages
should also be extremely low. However, it needs to be emphasised that the incomes of the majority of wage earners are,
in fact, much lower than the average income per head and
their living standards are even lower than is suggested by
figures showing the average consumption of, say, food and
clothing.
At present the lack of adequate comparable wage data
makes it virtually impossible to analyse systematically the
differences in the real wages and earnings received by different
groups of wage earners in different sectors of the economy in
Asian countries. The commonly held view is that in towns
the level of money wages of industrial workers is higher than
in villages, that the level of wages in factories is higher than
in handicrafts, and that the level of wages in plantation
estates is higher than those paid by cultivators. " In other
words, money incomes have a tendency to decline the more
one moves from town to village, or from modern factory
systems to traditional handicrafts." 2
This view, based mainly on general observations, affords
a useful guide to further investigation into the wage structures
of Asian countries. Any such investigation, if it is to throw
hght on differences in real earnings, will of course have to
take into consideration the differences in cost of living, in
payment in kind and in continuity of employment, and many
other factors.
1

Government of the United Provinces : First Beport of the United
Provinces Labour Enquiry Committee, 1946-48, Vol. I, Part I : Wages, Dearness Allowances and Bonus (Allahabad, 1948), p. 297.
2
Agricultural Wages and Incomes of Primary Producers, op. cit., p . 58.

THE GENERAL PROBLEM OP INCOME IN ASIA

17

In what follows a limited number of factual data are
presented which bear upon certain aspects of wage differences
in these countries.
Agricultural and Industrial Wages.
Most of the available data tend to indicate that the average
earnings of agricultural wage earners are lower than those of
industrial wage earners. In India the differences are particularly great, as shown in table IV. In each of the seven
states covered the average annual income per earner of agricultural workers' families in 1949 (including home-grown
produce and payment in kind) amounted to only a fraction
of the average annual earnings of a factory worker and was
in most cases substantially below those of the factory worker
in the lowest paid factory industry. 1
TABLE IV.
AVERAGE ANNUAL EARNINGS OF AGRICULTURAL
WORKERS IN SEVEN STATES IN INDIA, 1 9 4 9
Agricultural workers

Factory workers

State
Village

Magupara
Dorwan

. . .
. . . .

Madhya Pradesh

U t t a r Pradesh

Vandalur

. . .

Khuntuni

. . .

Khalispur

. . .

Per family

Per
earner

All industries

Lowest
paid
industry

477.11
4MA
312.8 2
322.5
Í 267.6 3 1
| 347.4 4 )
754.0 5
488.3 6

339.0
261.6
186.2
165.5

951.1
946.2
841.9
726.6

284.3
335.9
325.4
373.8

152.1

527.0

151.7

280.4

993.0

652.5

364.5

839.0

676.1

1 251.6 8' J

West Bengal

. .

Brindabanpur . .

1 464.6 1
\ 641.7 » |

Source : Average annual earnings of agricultural workers from reports of t h e preliminary inquiry into the conditions ot agricultural workers u n d e r t a k e n b y t h e Ministry
of Labour in 1949 ; average annual earnings of factory workers from Indian Labour Gazette,
Vol. I X , No. 5, Nov. 1951, p . 362.
1
Agricultural worker with land. ! Casual worker w i t h o u t land. • Attached worker.
4
Casual worker. * Attached worker with land. • Attached worker without land. ' Landless
casual worker. • W i t h land. * W i t h o u t land.
1
Part of the difference in annual earnings may be due to a difference
in the number of man-days worked during the year. It should also be borne
in mind that in Asian countries the term " industry " covers a mixture of
more or less modern large factories and more primitively equipped and
operated small establishments, and that wages in these two sectors often
differ very substantially. For example in 1953 minimum daily wages in
the cigarette factories in Indonesia were approximately 10 rupiahs while

(Footnote continued

overleaf)

18

WAGE POLICY IN ASIAN COUNTRIES

For other Asian countries some of the relevant data on
agricultural and industrial wages are summarised in table V.
The data are too fragmentary for close comparison. Eoughly,
however, it appears that in Ceylon, Malaya, the Philippines
and Thailand average industrial wages were higher than
average agricultural wages. In Japan average daily earnings
in manufacturing in 1949 were higher than in agriculture for
male workers but were lower for female workers. In pre-war
Indonesia the average wages earned by plantation workers in
Java did not seem to compare unfavourably with the average
wages in some manufacturing industries such as rice mills, and
biscuit and textile factories.
Since the average industrial wages include the high wages
earned by skilled industrial workers, a more significant comparison will be between the wages of agricultural workers and
those of unskilled non-agricultural workers. In Ceylon one
investigator observed that the wages of the lowest grade
workers in port transport trade (which ranged roughly from
1.75 to 2 rupees per day in 1951) were comparable to the
wages of the plantation workers. 1 In the Philippines the
average daily wage rate of unskilled industrial workers in 1950
was 1.87 pesos compared with 1.70 pesos for agricultural
labourers. 2 As the agricultural labourers are provided with
two free meals a day in addition to the money wage, the real
earnings of unskilled industrial workers seem to be even lower
than those of .agricultural labourers. In Burma the data given
in table V suggest that in terms of monthly real wages the
unskilled workers in unregulated factories or unorganised
industries before the war earned less than agricultural
workers, though those in organised industries appeared to earn
a good deal more. In India a pre-war comparison disclosed that
the wages of the lowest grade of workers employed on manual
work in factories were substantially higher than the wages
in small cigarette works, where the trade unions have far less influence, the
daily rate was often not higher than 3 rupiahs (Bank Indonesia : Report
of the Governor of Bank Indonesia for the Financial Year 1953-1954 (Djakarta,
1954), p. 143).
1
K. P . MUKBRJI : " Agricultural Labour in Ceylon ", in Ceylon Trade
Journal (Colombo, Department of Commerce), Vol. XVI, No. 7, July 1951,
pp. 411-412.
2
Abstract of Philippine Statistics (Manila, Department of Commerce
and Industry, Bureau of the Census and Statistics), Vol. I, No. 2, Jan.-Mar.
1951, pp. 8 and 10.

T H E G E N E R A L P R O B L E M OF INCOME I N ASIA

T A B L E V.

AGRICULTURAL AND I N D U S T R I A L W A G E S I N C E R T A I N
ASIAN
(Daily

Country

19

COUNTRIES

wages unless otherwise

indicated)

Average agricultural wages

Average industrial wages

Burma
(pre-war)

100 to 140 baskets of paddy
(approximate cash equivalent 100 to 140 rupees) plus
board for 7 months

Unskilled labour :
unorganised industries : 15 rupees per
month ;
organised industries : 30 to 35 rupees
per month

Ceylon
(1948)

Plantation workers x :
adult male : 1.49 rupees ;
adult female : 1.16 rupees

Match manufacturing :
adult male : 2.20 to 2.86 rupees ;
adult female : 1.84 t o 2.40 rupees

Indonesia
(pre-war)

West J a v a :
male preparers of cinchona
bark : 0.23 florins ;
male harvesters : 0.35 florins

J a v a and Madura enterprises, 1939 :
skilled worker in metal industries :
0.60 to 0.80 florins ;
male soap maker : 0.30 to 0.40 florins ;
male printer in European-type shops :
0.34 to 0.45 florins ;
male wage in rice mills for milling
work : 0.20 to 0.30 florins ;
men and women weavers : 0.14 to
0.32 florins ;
male wage in biscuit factory : 0.18 t o
0.20 florins ;

Outer Islands :
basic wages for casual male
estate labourer in 1939 : 0.27
to 0.32 florins

Japan
(1949)

Regular day labourer (including b o a r d ) :
m a l e : 236 y e n ;
f e m a l e : 185 yen

Manufacturing :
m a l e : 374 y e n ;
female : 165 y e n

Malaya
(pre-war)

Unskilled plantation worker :
$0.35 to $0.60

Skilled male factory worker : $0.80 to
$1.20 (in some cases as much as $3)

Philippines
(1950)

Agricultural labourers : 1.70
pesos plus two free meals

Industrial workers : from 3.07 pesos in
East and West Visayan to 4.27 pesos in Southern Luzon

Thailand
(pre-war)

Rural wages : 0.50 to 1 baht

Coolies : 0.80 baht ; other workers :
up to 2.50 bahts

Sources : Burma—ANDRUS : Burmese Economic Life, op. cit., pp. 263 and 266. CeylonGovernment of Ceylon : Labour Commissioner's Report, 1948. Indonesia—Virginia
THOMPSON : Labour Problems in Southeast Asia (New Haven, Yale University Press, 1947),
pp. 141-143. Japan—I.L.O. : Year Book of Labour Statistics 1949-50 (Geneva, 1951).
pp. 157 and 207. Malaya and Thailand—Indian Council of World Affairs : Labour in
South East Asia, edited by P. P. PILLAI (New Delhi, 1947), pp. 148-151 and 200.
Philippines—Abstract of Philippine Statistics, op. cit., pp. 8 and 10.
1
Average daily wage rates were fixed by the wages boards and include special allowances. Those for plantation workers cover tea, rubber, cocoa, cardamom and pepper
growing and manufacture.

20

WAGE POLICY IN ASIAN COUNTRIES

earned by field labourers in agriculture. 1 Another investigation showed that the ordinary monthly wage rates paid to
railway coolies in the United Provinces in 1944 varied between
16 and 20 rupees and that these rates were almost at par with
the monthly wage rates of ploughmen in the North-West
Eegion of the Provinces (15 to 20 rupees) but were higher than
the latter in the Central Eegion (8 to 10 rupees) and considerably higher than those in the Eastern Eegion (3 to 6 rupees). 2
A few general remarks may be made on differences between
agricultural and industrial wages. First, the differences in
wages alone do not provide an adequate indication of the
differences in annual real earnings. The annual real earnings of
agricultural wage earners are probably much smaller than
their monthly or daily wages would suggest because of long
periods of seasonal unemployment that the majority of industrial workers do not suffer. On the other hand, the cost of
living is usually higher in towns and cities than in the country,
and in certain industrial districts the housing conditions of
industrial workers are perhaps worse than those of agricultural
workers. Where the annual money incomes of industrial
workers are higher than those of agricultural workers, the
differences in living standards are likely to be reduced appreciably by these factors.
Secondly, industrial wages are lowest where the industrial
workers still maintain a close connection with agriculture. In
India this is evidenced by the especially low wages earned by
workers in seasonal factories such as rice mills, and cotton
ginning and pressing factories, and also in collieries.3 Most of
1

The comparison is as follows :
AVERAGE MONTHLY WAGES, 1 9 3 7 - 3 9
(Rupees)
Provinces

Unskilled workers
in factories
17
9
9
7
6
8
7

Source : R a d h a k a m a l M U K E R J E E : The Indian
2

Working

to
to
to
to
to
to
to

20
12
12
10
9
12
10

Agricultural
labourers
7
6
5
4
4
5
4

to
to
to
to
to
to
to

9
8
8
7
6
7
6

Class, op. cit., p . 192.

Government of the United Provinces, Department of Economics and
Statistics : Sural Wages in the United Provinces by S. C. CHATURVEDI
(Allahabad, 1947), p . 105.
3
For a comparison of wages prevailing in those industries with agricultural wages see The Indian Working Class, op. cit., p . 7.

THE GENERAL PROBLEM OP INCOME IN ASIA

21

these workers are cultivators who expect to earn in factories
and mines only a supplementary income during the off seasons.
Thirdly, in time of inflation the real earnings of industrial
workers with weak bargaining power are likely to fall in
relation to those of agricultural workers, since the latter are
better protected by payments in kind. Thus it was observed
that in China during 1940, when the cost of living was rapidly
rising, a skilled factory worker in Kunming " did not earn
much more than the unskilled farm labourer and the position
of the unskilled factory worker was decidedly inferior ". 1
Plantation and Farm Wages.
The general observation that plantation wages are, on the
average, higher than wages paid to non-plantation agricultural
workers appears to be true in Ceylon and Malaya. In Ceylon
one observer, referring to the wage situation in 1951, states
that 40 rupees per month or 1.35 rupees per day (i.e. the daily
wages of a casual farm labourer) may be taken as the average
daily income of the non-plantation agricultural worker, and
2 rupees per day that of the plantation worker. 2 Pillai also
reported that the wages paid to estate labourers in Malaya
were higher than those of men employed on small holdings. 3
While productivity on plantations is generally greater than in
peasant agriculture, it does not follow that workers on plantations are necessarily paid higher wages than those hired on
farms. In South India, as far as the wage data for 1947 indicate, the reverse seems to be true ; in Nilgiris, Malabar,
Wynaad, Coorg and Cochin the daily wages (including district
allowance and grain compensation allowances) of workers on
tea, coffee and rubber plantations were lower than the daily
wages of agricultural workers paid by cultivators in the surrounding areas. The comparative wage figures for these two
groups of agricultural workers in South India are given in
table VI below.
From the point of view of wage policy it would be particularly useful to ascertain the degree of correspondence between
fluctuations in plantation wages and fluctuations in the prices
1
Kuo-Heng SHIH : China Enters the Machine Age (Cambridge, Mass.,
Harvard University Press, 1944), p. 76.
2
K. P . MUKEEJI : " Agricultural Labour in Ceylon ", in Ceylon Trade
Journal, op. cit., p . 411.
3
Indian Council of World Affairs : Labour in South Hast Asia, edited by
P. P . PILLAI (New Delhi, 1947), p. 148.

22

WAGE POLICY IN ASIAN COUNTRIES

TABLE VI. DAILY WAGES OP PLANTATION WORKERS AND OF
FARM WORKERS IN SOUTH INDIA, 1 9 4 7
(1 rupee=16

annas ; 1 anna=12
Plantation wages

pies)

1

District

Farm wages
Tea

Nilgiris :
Skilled men . .
Men
Women
. . . .
Malabar :
Skilled men
Men
Women

Women
Ooorg

p.

Rs a.

1
1
0

1
0
0

1
0

0
11

2

0

12

64

2

2

0

9

64

2

1
0
11

. . . .

p.

Rs. a.

2

p.

Rs. a.

2

1 4
1
0

2

0
15

6
6

2

2

2

2

0

10

6

2

2

0
03
2

2

1
0

p.
2

2

0
0
2

2

. .

. .

Rubber

Rs a.

. . . .

Wynaad :
Skilled men
Men

Coffee

1

4
to
8
0

1
1

0
0
0
2

1

4
to

0

1 8
1
0

0
0

:

Men
Women

0
0

2
2

. . . .

11
8

6
6

0
0

85
85

10
10

to
0
Gochin :
Skilled men
Men
Women

. .

. . . .

1
1
0

1
0
12

0
0
0

9

9

I

2

1
0

0
12

}_.

2

0
0

0
0

10
9

68
08

7
•

Source : Government of India, Ministry of Labour, Labour Bureau : Report on an
Enquiry into the Cost and Standard of Living of Plantation Workers in South India (Calcutta,
1948), p . 58 and p p . 99-100.
1
Daily wages in plantations include basic wage, district allowance and grain compensation allowance. • N o t available. 3 Plus 6 lb.
of potatoes. ' A bonus of 1 anna per day is
also given if t h e y work for six days a week. 6 The wage applies to tappers ; wages for other
workers averaged R s . 0—9—8. • R s . 20 per m o n t h with free board ; casual labourers,
R s . 2 per d a y without food. ' There are two scales, viz. : Trichur : men, R s . 1—8—0 ;
women, R s . 1—0—0 8; Interior : men R s . 1—4—0 ; women, R s . 1—0—0 ; figures for skilled
m e n not available.
Figures relating to non-resident workers ; for resident workers t h e
average wage was R s . 0—11—6 for both men and women.

of plantation products and also the indirect effects of these
fluctuations on the wages of non-plantation agricultural
workers in areas adjoining the plantations. The data at present
available are, however, not sufficient for an adequate analysis
of this problem.
Handicraft and Factory Wages.
Information on wages in handicraft and cottage industries
is more scanty than that on wages in other sectors of the

THE GENERAL PROBLEM OF INCOME IN ASIA

23

Asian economies. It can, however, be taken for granted that
the wages prevailing in that sector vary considerably with the
craftsmanship required of the worker and also with the level
of activity in the industry in question. In the case of the
Indian handloom industry where wages and earnings declined
drastically during the 1930s, a thorough investigation undertaken by a fact-finding committee during the war revealed
that in the majority of the districts investigated weavers
working in Tcarhhanas (i.e. wage earners in hand-weaving
workshops) in 1941 earned about 10 rupees a month during
busy seasons, while in some districts their earnings were even
smaller. 1 It may be noted that in the same year the average
annual earnings of textile factory workers amounted to 314
rupees or about 26 rupees per month. 2 Thus the weavers in
Tcarlchanas appear to have earned less than half the average
earnings of workers employed in modern textile factories ; their
relative position was even worse owing to seasonal underemployment which often lasts for three or four months. The
committee observed that, in spite of their considerable hereditary skill, the majority of the hand-weaver s were receiving
only the income of unskilled labourers. 3 The lack of current
information makes it difficult to find out how far their position
has changed since the end of the war.
In Indonesia pre-war data indicate that, in cottage industries controlled by baTculs (i.e. a special class of middlemen who
supplied home worker s with materials, paid them wages and
sold their products), wages were especially low. One competent
observer described the pre-war situation as follows * :
In the section of cottage industry controlled by bakuls, the sums
earned were so unbelievably small that they could hardly be termed
wages ; rather they were simply spare-time contributions to the
family exchequer. Although earnings wherever cottage industries
were allied to the Centrals [co-operatives] were also insignificant,
they still compared favourably with what was derived from cultivating the soil. Wages paid in small-scale industry were, in general,
appreciably higher, although they varied greatly according to the
industry and the locality. In the Centrals and in the new industries
established during the 1930s, wages ranged from 0.30 to 0.10 florins
1
Report of the Fact-Finding Committee (Handloom and Mills), op. cit.,
pp. 82-83.
2
Figure from I.L.O. : Year Booh of Labour Statistics 1949-50 (Geneva,
1951), p. 187.
3
Report of the Fact-Finding Committee (Handloom and Mills), op. cit.,
p. 201.
4
Virginia THOMPSON : Labour Problems in Southeast Asia (New Haven,
Yale University Press, 1947), p. 143.

24

WAGE POLICY IN ASIAN COUNTRIES

an hour whereas in the Ja&wZ-controlled enterprises they amounted
to only about half these sums.
I t would seem desirable to investigate whether or not this
situation has improved in recent years, since, according to the
pre-war estimates, no less than 40 per cent, of the total number
of workers in small and cottage industries earned their livelihood through the medium of bakuls.1
Unskilled and Skilled Wages.
In Asian countries, while there is an abundant supply of
unskilled labour, the supply of skilled labour is exceedingly
small. It is therefore generally believed that the wage differentials between unskilled and skilled labour are greater in
these countries than in the economically developed countries.
A systematic comparison of wage differentials by skill in the
Asian countries and those in other countries encounters
many practical difficulties. First, in most Asian countries
there is a lack of comprehensive wage statistics for different
occupations. Secondly, where such data exist, the job
content of the occupations in question is not always clear.
Thirdly, even where the occupations are clearly defined it is
often difficult to ascertain the elements of remuneration
covered by the term " wages " or " earnings " used in the
statistics. Finally, wage differentials by skill in the same
industry are likely to vary in different localities and even
greater variations exist from industry to industry.
While recognising all these difficulties, it still seems instructive to make some rough comparison of the wages earned by
certain categories of skilled workers in relation to those of
unskilled workers in a few selected industries in several Asian
countries and in several economically developed countries. The
results of this comparison are given in table VII. In the three
selected industries—construction, textile manufacture and
manufacture of machinery—the wage differentials between
unskilled labour and skilled labour in certain Asian countries
do seem to exceed those prevailing in many economically
advanced industries. This is particularly noticeable in the
construction industry.
While the above comparison supports the commonly held
view, it is difficult to generalise for several reasons. First
of all it is necessary to distinguish between workers in tradi1

The Economie Background of Social Policy . . ., op. cit., p . 57.

TABLE VII. U N S K I L L E D AND S K I L L E D WAGES I N T H R E E I N D U S T R I E S I N S E L E C T E D ASIAN

AND

INDUSTRIALISED

C O U N T R I E S , OCTOBER 1 9 5 3
(Hourly

wage rates, adult

Î

males)

Q
Construction industry
Country

Currency

Unskilled
labourers

Electrical
fitters

(A)

(B)

(B)
as % of
(A)

Manufacture of machinery

Textile manufacture
Unskilled
labourers

Weavers

(C)

d»

(D)
as % of
(C)

Unskilled
labourers

Pattern
makers

(E)

(F)

W
(F)
as % of
(E)

t»
O

x

China (Taiwan)
. . . .
Hong Kong
3
India ( B o m b a y )
. . . .
Indonesia ( D j a k a r t a ) 3 . .
East Pakistan (Dacca) . .
United
States
(NewYork)
Canada
U n i t e d K i n g d o m (Manchester) 3
Germany (Federal Republic) ' "
Source : Year Book of Labour Slatistics

Yuan
HK$
Rs.
Rupiahs
Rs.

2.50
0.38

4.00
0.75

160
197

5.50
0.22

15.00
0.44

273
200

2.45
1.18

3.30
1.96

135
166

Shillings

3.08 e

3.58

116

Marks

1.30

1.80

138

1.63
0.38
0.44
5.00
0.19

:

1.79
0.50
0.53
8.50
0.28

a
4

110
132
120
170
147

1.20<

1.03

1.21

117

w

1.94
0.43

2.97
0.83

153
193

5.50

17.50

318

O

1.47
1.13

1.72

152

G
O

2.69

3.50

130

1.18

1.84

156

!»

1954, op. cit., p p . 226 ff.

' E a r n i n g s . ' E x c l u d i n g free lodging provided. ' M i n i m u m rates. « Cotton ; woolweavers 0.78. ' C o t t o n and woo ) industry. « S t a n d a r d rate. ' M i n i m u m
rates in highest seniority class a n d wage zone.

fco

26

WAGE POLICY IN ASIAN COUNTRIES

tional handicrafts and those in modern industries. I t is
conceivable that in many of the handicraft industries, as a
result of their secular decline, the wages of skilled labour have
been greatly reduced in relation to the wages of unskilled
labour. The most conspicuous case, as already noted, is the
income position of the Indian hand-weavers. Secondly, as
regards modern industrial skills it should be pointed out that
wage determination in the majority of modern industrial
enterprises is hardly based on scientific methods of job evaluation. The wage scales in operation often contain many
anomalies and do not fully reflect the differences in skill
requirements. Thirdly, the inadequacy of collective bargaining
and of effective wage fixing machinery in Asian countries
makes it difficult for skilled workers to secure wages in accordance with their skill. Finally, the mere fact that the present
supply of certain types of industrial skill is small does not
necessarily mean that these skills are scarce in relation to the
existing demand. In some cases the demand for such skills
may be equally small and consequently the wages paid for
them may also be relatively low. Only when industrialisation
is proceeding at a rapid tempo will the scarcity of skilled labour
become increasingly felt and be reflected more and more
clearly in the scale of wages.
The relevance of the facts discussed above for the consideration of wage policy in Asian countries may now be briefly
indicated.
(1) The extent to which wage policy as such may be
expected to raise the living standards of the working population
in Asian countries will be limited basically by these countries'
low capacity to produce, as evidenced by their small output
and income per head.
(2) Por those members of the working population whose
incomes are below the average some improvement in living
standards may be possible through measures, including wage
policies, which reduce inequalities in income distribution.
It is, however, important to recognise that in Asian countries
the majority of the working population with sub-average
incomes are self-employed, the proportion of wage earners
being considerably smaller than in economically advanced
countries. Thus the benefits of wage policy are likely to reach
only a relatively small proportion of the working population.

THE GENERAL PROBLEM OF INCOME IN ASIA

27

For the majority, to redistribute income in their favour will
require other forms of social policy such as fiscal policy and
agrarian reform.
(3) The available data tend to show that in most Asian
countries the majority of wage earners are engaged in agriculture—on plantations and on small holdings ; that in
secondary production a considerable proportion of wage
earners are employed in the handicraft and cottage industries
and only a very small proportion in modern factory industries ;
and that in tertiary production the largest single group of
wage earners is in personal services, particularly in domestic
service.
(4) In the absence of adequate data it is difficult to
establish firm conclusions on the question of relative wages.
However, certain tentative observations may be made on the
basis of the limited data available. First, in nearly all Asian
countries agricultural wages are among the lowest—lower
than average industrial wages. The annual earnings of agricultural wage earners are even smaller than is reflected in
their monthly or daily wages, because of long periods of
seasonal underemployment. Secondly, the relationship between
plantation wages and farm wages seems to vary in different
countries and perhaps also in different localities ; in some
countries plantation wages are higher than farm wages and
in others lower. Thirdly, althoiigh wage statistics concerning
handicraft and cottage industries are particularly meagre,
such pre-war information as is accessible reveals that in
industries that are in a state of secular decline or are subject
to exploitation by middlemen the earnings of wage earners
were exceedingly small compared with the average earnings
of industrial workers. Fourthly, a rough comparison tends to
confirm the common view that the differences in wages between
unskilled and skilled industrial labour are greater in Asian
countries than in economically advanced countries.
The
unskilled industrial workers are the lowest-paid industrial
workers and their living standards are deplorably low. As in
the case of agricultural workers, very many of them have
to resort to continuous borrowing in order to meet the minimum
requirements for subsistence. Finally, there is practically no
information available on wages in personal services ; the
income position of this important group of wage earners is
therefore not clear.

3

28

WAGE POLICY IN ASIAN COUNTRIES
T H E BASIC APPROACH TO EAISING INCOME

In Asian countries, as elsewhere, substantial and continuing
increases in the general level of real wages will depend on the
expansion of total national output. The crux of the matter
lies in the rate of economic development.
To accelerate
economic development is now the central objective of economic
policy in all the Asian countries, and in each country concrete
plans have been made and are being carried out to achieve
this objective.
However, while economic development, by expanding
national output, will eventually raise workers' living standards
it is important to recognise that, because of the great need
for resources to build up capital equipment, the amount of
resources available for current consumption may for some
time remain small during the process of development. During
that period workers' living standards may not significantly
improve and may possibly fall if some of the resources formerly
geared to workers' consumption are diverted to capital formation. This issue is often raised in connection with the appraisal
of capital requirements for economic development, but so
far no attempt has been made to explore fully all the possible
approaches to its solution. Since Asian governments are
pledged to accelerate economic development, the kind of wage
policy to be adopted by those countries in the years ahead
will need to be closely related to the manner in which this
vital issue is to be resolved.
The Conflict between Capital Formation and

Consumption

The issue is usually stated in the following way : The
rate at which national output and income may increase
depends to a large extent on the rate at which productive
equipment and facilities can be built up. Productive equipment and facilities consist of many different things : railways,
roads, rolling stock, harbours, power installations, irrigation
and drainage works, factories, mines, machinery and tools,
public utilities, and so on. If national output and income are
to increase, the stock of all these things, constituting the
community's productive capital equipment, must first of all
be expanded. To expand the stock of capital goods, however,
requires resources in the form of materials, labour, equipment

T H E G E N E R A L P R O B L E M OF I N C O M E IN ASIA

29

and organising ability. In the countries of Asia the difficulty
is that the resources at present available for production are so
limited that the bulk of them are used up in meeting the basic
consumption needs of the population. The issue of policy
confronting these countries is : to what extent and in what
ways could capital formation be accelerated without diverting
resources from production for current consumption, which is
already so very low 1
In an admittedly highly abstract and oversimplified way
the problem might be conceived of as dependent on the following quantitative relations :
(1) the capital-output ratio, i.e. the probable amount of
additional output and income that will be created as a result
of a given amount of capital formation ;
(2) the planned increase in national output and income ;
(3) the additional amount of capital formation required
to bring about the planned increase in national output and
income ;
(4) the ratio of the additional amount of capital formation
thus required to the present national income ;
(5) the ratio of present capital formation to present national
income.
The concept of the capital-output ratio, when applied to
the economy as a whole, raises a number of conceptual problems
which need further exploration. In the first place it is worth
remembering that capital investment does not yield income
automatically, and that the amount of income yielded will
depend upon the soundness of investment decisions and the
care subsequently devoted to the maintenance of equipment.
Unsound investment decisions—for example the choice of
unsuitable equipment or a bad site—or faulty maintenance
may involve a serious waste of scarce capital. In fact, there is
not one but a large number of capital-output ratios, the size
of the relevant ones being dependent, for example, on the
direction that capital formation takes and on the time period
considered. Thus the substantial investments required in most
underdeveloped countries for the improvement of communications and basic facilities are likely to result in a slowly increasing annual " ratio " between the income created by new investment and the amount of such investment, as complementary
investments in manufacturing and the like are made. While in
the first few years the " ratio " in such cases may be very low,

30

WAGE POLICY IN ASIAN COUNTRIES

in the long run it may rise to a higher level. Also, the capitaloutput ratio for any particular industry is not usually given
but, at least to some extent, is a matter of choice and decision.
Similar products may be produced with more or less capital
and less or more labour per unit of output. Inasmuch as
economic planning is usually limited to periods not exceeding
five or ten years, " ratios " computed on the basis of long-term,
secular developments are of restricted use for the purpose of
such planning.
Nevertheless, on the basis of the estimated ratios of value
of national stock of capital goods to value of annual national
income (the former estimated at between three to five times
the latter) for several industrial countries, one recent study 1
indicated that " a l per cent, per annum increase of national
income seems to be associated with somewhere between
3 per cent, and 5 per cent, net annual capital formation ".
While accurate data on' net capital formation are scanty for
most Asian countries, it has been roughly estimated that the
current levels of net capital formation in Asia are around
5 per cent, of national income per annum. As population in
Asian countries is increasing by 1.5 per cent, or more per
annum, the same study concluded that this rate of net capital
formation is not enough to raise the standard of living and
that an annual net capital formation of 15 per cent, or more
of national income will be necessary if the average standard
of living is to increase by 1.5 to 2 per cent, per annum. How
would such a rate of capital formation affect the current
level of consumption? Obviously, if the resources needed for
the increased rate of capital formation are transferred from
resources previously employed, then at the initial stage current
consumption would be reduced by about 11 per cent. True,
after this initial decline consumption would again rise steadily.
But it would take a number of years before consumption was
restored to its former level, and only after the lapse of these
years would consumption per head begin to exceed its
1
" Some Financial Aspects of Development Programmes in Asian
Countries " in United Nations : Economic Bulletin for Asia and the Far East,
Vol. I l l , Nos. 1-2, Jan.-June 1952, p. 1. Clark, in his recent report on the
economy of Pakistan, estimates on the basis of the experience of a number
of countries at different dates and different stages of development that a
new capital investment of 4 rupees will raise real national income by 1
rupee per annum. (See Colin CLARK : " No Tax on What Is Saved ", in
Pakistan Economist, Vol. V, No. 1, 10 Jan. 1953, p. 11.)

THE GENERAL PROBLEM OF INCOME IN ASIA

31

former level and continue its upward trend at 2 per cent.
per annum. 1
The above quantitative formulation of the issue, though
highly simplified and based on estimates subject to wide
margins of error, at least brings into relief the magnitude of
present sacrifice in terms of reduced current consumption
which might be required if consumption and living standards
are to be raised in the future. Of course, some contribution
to the solution of this problem can be expected from measures
for the improvement of industrial productivity, inasmuch as
such measures result in a more effective use of materials, fuel
and equipment. Indeed, the fact that productivity improvement thus constitutes, as it were, a partial substitute for
capital formation through reduced consumption or capital
imports is the basic case for productivity work in underdeveloped countries. But while productivity improvement
may make unexpectedly large contributions to the solution
of the problem of capital shortage it cannot by any means be
expected to solve this problem by itself, and other sources of
capital formation will be needed.
In the light of historical experience it appears that in some
at least of the countries that are now highly industrialised the
process of rapid capital formation was for a long time accompanied by low levels of mass consumption. In England in
the early years of the Industrial Eevolution the level of real
wages and mass consumption remained low and there was an
almost total absence of social services and social legislation.
1
In actual practice the problem is, of course, far more complicated
than the simple arithmetic presented in the text might suggest. For example,
it is by no means certain that if any country succeeded in bringing consumption down by something of the order of 10 per cent, private enterprise would
actually find profitable outlets for the large additional savings thus becoming
available. The very fact that consumers' demand had fallen substantially
would probably discourage investment. Another factor affecting the economic feasibility of a drastic increase of capital formation on the basis of
domestic saving is the lack of mobility of productive resources between
industries producing consumption and investment goods respectively. For
example, a reduction in the consumption of food, while it might make some
resources engaged in the output of agricultural implements available for
the production of manufacturing equipment, would not necessarily result
in the availability of substantial resources for railroad construction. In
other words, there are technical limits to the feasibility of substantial
shifts in the ratio of output of consumption and investment goods. The
fact that such limits become less narrow if possibilities of foreign trade
are taken into account (if savings on food consumption could be exported
in exchange for foreign steel, rice could, indeed, be converted into rails)
points to the importance of the balance of payments, referred to in Chapter
IV below.

32

WAGE POLICY IN ASIAN COUNTRIES

Though statistics are lacking, the income distribution is
believed to have been highly unequal. Industrialisation
gave birth to numerous private fortunes, which supplied the
necessary savings for productive investment. Another case is
that of Soviet Eussia during the period of the First Five-Tear
Plan. The rapid capital formation achieved in Soviet Eussia
during that period was made possible chiefly by direct limitation of output of consumption goods through state planning.
The resources thus released were directed into public investment. A third example is Japan. As in England, during its
early stage of industrialisation, the level of real wages in
Japan remained low and income distribution was highly
unequal. But in Japan the Government played an important
role in initiating and quickening the pace of capital formation
and economic development. 1 A close and careful study of the
experience of these and other economically advanced countries
should be of assistance in forming a clear conception of the
problem which confronts the Asian countries today.
Whatever the economic forces or mechanism that kept
down mass consumption in other industrialised countries
during their early period of rapid capital formation, the social
conscience of the underdeveloped countries today demands
that the workers should obtain their full share of the fruits of
economic development and that their living standards should
improve as rapidly as possible in the course of development.
Under the dictates of this new social conscience the policies
of capital formation and economic development to be adopted
should, therefore, be radically different from those followed in
many countries in the past. The first and most important
contribution that economic development can make to an
increase in workers' living standards undoubtedly is the
provision of more, and more productive, employment opportunities. I t is likely that only after some substantial progress
has been made in the elimination of structural unemployment
will it be possible to raise rates of remuneration substantially.
Meanwhile, there is room for rectifying existing glaring
inequities and exploitation of labour, for example through
minimum wage regulation.
1
Cf. H. W. SINGÉE : " Development Projects as Part of National
Development Programmes ", in United Nations : Formulation and Economic
Appraisal of Development Projects (1951), Vol. I, pp. 79-85 ; and G. D. H.
COLE : Introduction to Economic History, 1750-1950 (London, Macmillan and
Co., 1952), pp. 40-138.

THE GENEKAL PROBLEM OP INCOME IN ASIA

33

Possible Lines of Action
All the important problems of policy raised by this approach
to capital formation and economic development obviously
cannot be considered here without straying too far afield.
Nevertheless, the following possible lines of action may be
briefly indicated.
Effective Utilisation of Surplus Labour.
In most Asian countries there is a large reservoir of surplus
labour. If this surplus labour could be put to work to create
additional real capital, the additional capital thus created
would be a net addition to national output and income. I t
requires no previous saving and no cut in the community's
total consumption, although it does require some shift in real
income and consumption, in favour of the labour employed on
such projects. 1 Further, if the capital construction projects to
be manned by the surplus labour are of such a nature as to
yield an early increase in consumer goods, the workers' living
standards will soon improve. One clear example is the construction of simple local irrigation works. In planning for
capital formation in Asian countries there is considerable
scope for projects of this nature. The speed with which such
capital construction projects can be extended depends not so
much on the availability of materials as on the organising
ability of the government and the enterprise and initiative of
the people. The development of rural community projects
now in progress in several Asian countries is a step in this
direction. Work in this field, however, needs to be greatly
expanded in order to bring about substantial results.
Rapid Spreading of Improved Techniques Requiring Little
Additional Capital.
So far, most of the planned increases in national output in
Asian countries are projected on the basis of the expected
results of new capital investment. Not enough emphasis has
yet been given to the possibilities of increasing national output
from the existing volume of capital stock. In view of the
1
On this point, see particularly Maurice DOBB : Some Aspects of Economic Development, Occasional Papers, No. 3 (Delhi, Delhi School of Economics,
1951), pp. 38-48 ; and Kagnar NURKSE : Some Aspects of Capital Accumulation in Underdeveloped Countries, National Bank of Egypt, 50th Anniversary Commemoration Lectures (Cairo, 1952), pp. 20-35.

34

WAGE POLICY IN ASIAN COUNTRIES

limited resources available for capital formation in these
countries, the exploration of such possibilities is clearly a
matter of prime importance. In agriculture, according to
expert opinion, the yield per acre of the existing land in most
Asian countries could be considerably increased by introducing
simple improved methods that involve little additional capital.
In industrial sectors—both traditional and modern—there are
also great possibilities of increasing the output of existing
units without much new capital investment. The same
equipment can produce more per unit of time if work is better
organised. More finished products can be got from the same
amount of raw material if waste is reduced. For no more than
the original cost of old equipment, new and more productive
equipment can be installed when depreciation allowances are
reinvested. These are only some of the ways to raise the
output of existing industries without additional investment.
The extent to which the national output of Asian countries
can be increased in this way will be determined, first, by
the amount of effort that these countries put into the search
for such methods and, secondly, by the rapidity with which
these improved methods, once devised, are actually adopted.
If these countries can make a concerted national drive towards
increased output by such means, it can reasonably be expected
that substantial additional amounts of national output will
be created simultaneously with and independently of the
execution of their programmes for new capital investment. 1
Careful Selection of Appropriate Projects for Capital Investment.
The specific projects to be selected for execution at various
stages of capital formation are bound to differ from one Asian
country to another. There are, nevertheless, certain general
criteria that may be suggested from the point of view both
of raising workers' living standards and of economy in the use
of resources. First, if workers' living standards are to be
improved early in the process of development, emphasis should
be placed on investment in industries producing indispensable
consumers' goods. Secondly, investment should be directed
towards removing bottlenecks in the supply of basic materials
essential to capital construction. Coal, iron and steel, timber
1
The I.L.O. is contributing in this field through the productivity
projects which are being undertaken in several countries under its technical
assistance programme.

THE GENERAL PROBLEM OF INCOME IN ASIA

35

and cement may be expected to fall into this category. Such
investment will, of course, need to be closely co-ordinated with
import programmes. Thirdly, since shortage of industrial
skills presents an equally serious obstacle to development,
investment in technical training must also be given a high
priority. Finally, in so far as there is plenty of surplus labour
to be employed, the capital investment projects should, as a
rule, be so designed as to equip additional labour for productive
work rather than to replace labour.
The present industrial technology in Asian countries
consists broadly of two types : the traditional and the modern.
The traditional type, as typified by handlooms, is inefficient,
since the net output per worker is extremely low, but the
amount of capital required per worker is also very small. The
modern type, borrowed from the West, has the. opposite
characteristics : high output per worker accompanied by a large
amount of capital required per worker. On the whole neither
type meets the twin objectives of economic development in
the region, namely a rapid expansion in both output and
employment. To achieve these twin objectives, it appears
essential to develop in many types of production a new industrial technology—substantially different both from present
cottage and handicraft industries and from present large-scale
factory industries—which for the same amount of capital
investment can simultaneously produce more than the former
and provide more employment than the latter. The application of this conception of technological progress to different
branches of manufacturing industry raises numerous technical
problems which will not be easy to solve. A sustained effort of
imagination and ingenuity is required. In directing and organising collective and individual efforts in this important field
of industrial invention and innovation governments will have
a pivotal role to play. A wider exchange of information on
technological matters among the countries of the region, and
between them and other countries that have recently undertaken programmes of industrialisation, could also quicken the
emergence of the new industrial technology. While the countries themselves should mobilise to the full their own technical
talents, they need external assistance as well. In this connection the Expanded Programme of Technical Assistance of the
United Nations and specialised agencies can make a particularly useful contribution.

36

WAGE POLICY IN ASIAN COUNTRIES

Full Use of Imported Resources.
Economic development and capital formation require
increased imports of capital goods and possibly also of essential
consumers' goods. The problem of policy here is to ensure that
the amount of domestic resources hitherto allocated to the
production of exports will not have to be increased too much
to meet the higher imports. Some of the many different
forms of action that might be taken to achieve this end may
be indicated.
First, in countries whose nationals have accumulated
considerable amounts of foreign assets and internationally
accepted media of exchange such as gold, consideration might
usefully be given to the feasibility of mobilising such assets
and exchanging them for goods essential to economic development. To the extent that this could be done, the draft on
hitherto employed domestic resources could be correspondingly
reduced.
Secondly, in many Asian countries capital formation has
been greatly hampered by violent fluctuations in export
earnings resulting from the instability of world prices of primary products. There is, therefore, an urgent need for concerted international action to promote a reasonable degree
of stability in the prices of such products. But it is important
to recognise in this connection that the ability of Asian countries to finance their import programmes will depend not only
upon stability of their export prices but also upon the terms
of trade.
Thirdly, it is now increasingly recognised that in most
Asian countries the high cost of planned capital formation
is due in large measure to the fact that " much of the equipment has to be imported from abroad at prices which are
high in relation to local productivity". 1 An essential problem
of planning that faces these countries, therefore, is to find
ways and means of keeping expenditure on imported equipment as low as possible, e.g. by avoiding the use of imported
machinery for work that can very well be done by local unskilled labour. Another possible solution would be for foreign
firms to set up plants designed especially for the manufacture
of simpler and less costly equipment to meet the specific
1
" Some Financial Aspects of Development Programmes in Asian
Countries ", loc. cit.

THE GENERAL PROBLEM OF INCOME IN ASIA

37

needs not of their home market but of the economically less
developed countries. Still another way would be for Asian
countries to make all possible commercial and financial
arrangements to purchase their imported equipment in
markets offering the lowest prices without sacrifice of quality.
Finally, it should be emphasised that while the lines of
action considered above all aim at making the fullest and
most effective use of domestic resources for capital formation and economic development, they will still have to be
supplemented by action to secure capital imports from
abroad. All possible steps should be taken to encourage the
inflow of foreign capital into Asian countries so long as it
does not jeopardise their sovereignty and economic independence.
Restriction of Non-Essential Consumption and Investment.
Even when full and effective use has been made of domestic
resources together with such foreign capital as it may be
possible to attract on reasonable economic and political terms, it
may still be necessary to restrict the use of resources—materials
and equipment, as well as human skills—for non-essential
consumption and investment. A variety of measures may be
adopted to achieve this end, including import controls, high
taxation on non-essential consumers' goods, direct allocation
of scarce materials and licensing of building construction.
With proper planning and co-ordination of activities in the
public and private sectors of the economy, any reduction in
the supply of non-essential consumers' goods may be accompanied by increases in the supply of essential consumers'
goods even in the early stages of rapid capital formation.
The above brief discussion suggests that the less favourable
aspects of the experience of countries now economically
advanced need not be repeated in Asian countries in the course
of their economic development.
CONCLUSIONS

In the period immediately ahead, as Asian countries make
increasing efforts to accelerate capital formation and economic
development, one important function of wage policy will be
to bring about a proper balance between workers' effective
demand and the available supply of essential consumers' goods.

38

WAGE POLICY IN ASIAN COUNTRIES

A basic objective of economic planning in this connection will
be to ensure that the supply of these goods will not fall but
expand during the period when increasing amounts of resources
will be needed for capital formation. In this chapter several
different lines of action have been suggested which, if followed
simultaneously, should go a long way towards achieving this
objective. When, as a result of these and other steps, the
supply of essential consumers' goods expands, the aim of wage
policy will be to ensure that the purchasing power of workers
increases commensurately.

CHAPTER II
THE OBJECTIVES OF WAGE POLICY
The term " wage policy " is used in this report to refer
to legislation or government action calculated to affect the
level or structure of wages, or both, for the purpose of attaining
specific objectives of social and economic policy. Methods of
wage determination through which wage policy may be implemented include statutory wage regulation, collective bargaining and the settling of wage rates through procedures for
conciliation and arbitration. The social objectives that wage
policy may be instrumental in attaining may include the
elimination of exceptionally low wages, the establishment of
" fair " labour standards, and the protection of wage earners
from the effects of rising prices. Such results are sought
primarily in order to promote the well-being of the wage earners
themselves. l The second aim of wage policy is to increase
the economic welfare of the community as a whole. Wage
policies may, among other things, help to maintain the
country's strength in international competition, to allocate the
labour force to industries or regions where it is most needed,
to increase the total effective demand for consumer goods, and
to provide an incentive for workers to improve their productive
performance. In Asian countries the most obvious general
economic objective of wage policy would be to establish a
level and structure of wages conducive to accelerated economic
development.
As will be seen from the brief description of existing systems
of wage regulation in Chapter III, most Asian countries have''
hitherto concentrated their efforts on the fixing of statutory
minimum wages, on the abolition of malpractices in wage
payment, and on the provision of facilities for conciliation and
1
" Social policy " should not, of course, be identified with action on
behalf of wage earners only. More generally, social policy is concerned with
the well-being of any economically weak group of the population. To the
extent that wage policy is related to social objectives, it is, however, primarily
concerned with wage earners' interests.

40

WAGE POLICY IN ASIAN COUNTRIES

arbitration in wage disputes. Measures adopted under the
first two of these headings are mainly intended to attain
objectives of social policy. Conciliation and arbitration may
also be instrumental in establishing fair or equitable wages,
but in addition they may serve to reduce social unrest and
thereby help to avoid economically undesirable stagnation in
production. Although several Asian countries have drawn up
plans for economic development, it would appear that comparatively little attention has been given to the question of
determining and establishing the level and structure of wages
most appropriate to attaining the objectives or targets under
these plans.
The social and economic aspects of wage policy are normally inter-related : measures inspired by social considerations
inevitably have economic effects, and action designed to achieve
specific economic results has social implications. For example,
the raising of wages through statutory minimum wage fixing
will normally affect production and employment in the
industries concerned ; and measures calculated to keep costs
of production at a competitive level may frustrate the aspirations of trade unions. When the social and economic implications of measures of wage policy conflict, a choice has to be
made. As indicated in the previous chapter, the most
important conflict of this nature is likely to be that between
efforts to improve workers' living standards immediately and
the need for capital formation as a basis for long-term economic
development.
ABOLITION OF MALPRACTICES IN W A G E PAYMENT

One of the important consequences, but in itself also a cause,
of the weak position of Asian wage earners has always been
the existence of malpractices in the payment of wages. These
include unduly high exactions made by recruiting agents and
subcontractors, the payment of wages at irregular and long
intervals and the resultant indebtedness of the workers, arbitrary and unjustified deductions from the worker's earnings,
and payment of wages in kind.
The problem inherent in these questions is that, to some
extent, the customs that have degenerated into malpractices are
in themselves quite natural and, given the specific structure
of the labour market in Asian countries, even useful. For

OBJECTIVES OF WAGE POLICY

41

example, the system of recruitment by middlemen is closely
connected with the importance of migrant labour in industries
like plantations and mining. Thus Indian, Chinese and Javanese labourers have for a long time been employed in a number
of countries in South-East Asia. Another factor responsible
for the persistence of indirect labour recruitment in the region
is the fact that many workers consider employment for wages
as only a supplementary source of income. So long as there
are no well organised employment services in these countries
the middleman can perform a useful function. But in practice
recruiting agents, often also acting as foremen, have in many
cases been responsible for much of the misery suffered by the
workers. They have often given a false picture of the conditions of work in order to persuade hesitant workers to accept
employment ; in other cases they have charged the workers
heavy commissions for their services and have profiteered
unscrupulously from the sale of food and other necessities to
the workers or, where gang wages were paid to them for
distribution among the workers in their gangs, have withheld
part of the earnings for their own benefit. In recent years
considerable progress has been made toward the elimination
of malpractices of this sort in several countries.
Payment in kind is still prevalent in certain industries in
Asian countries, especially in agriculture, because of the
importance of simple subsistance farming. To a smaller
extent payment in kind is also found in modern industries
(plantations, transport and manufacturing) and in traditional
handicraft industries. Again, payment of part of the workers'
wages in kind is not necessarily a bad thing. On the contrary,
when the workers have been recruited from distant areas and
are resident on or near the undertaking, the provision of
board and lodging may be indispensable. Moreover, in times
of rising prices payment in kind (for example, a rice allowance)
may be an effective device for protecting the workers' income.
But there are limits to the benefits of this system of wage
payment. The disadvantages are most obvious where the
workers are paid entirely with the employer's products and
have to try to sell these goods themselves. But when the
payment is in commodities that the worker can himself use,
the system may also lead to abuses if the employer is free to
determine the value of the goods supplied and make corresponding deductions from the worker's nominal earnings. In other

42

WAGE POLICY IN ASIAN COUNTRIES

cases where the worker is paid entirely in kind he will be
unable to pay off his debts and may be forced to stay with
one employer, often also his creditor, in a status that does
not greatly differ from bondage.
The effects of paying wages at long and irregular intervals
may also be very serious. When the worker does not receive
his earnings at sufficiently short intervals he will be induced
or forced to incur debts in order to live from one pay day to
the next, or he may be restricted in his liberty to abandon his
job and take up employment elsewhere. In some cases it is
for these very reasons, i.e. so as to retain an undue hold over
their labour force, that employers deliberately delay the
payment of wages. In other cases, notably in small indigenous
handicraft firms employing wage labour, the payment of
wages sometimes depends upon the sale of the product because
of a chronic shortage of cash.
A related aspect of wage protection is the question of
attachment and seizure of the worker's earnings once he is
in debt. I t is of special importance in Asian countries where
indebtedness is widespread. Sometimes, as was remarked
above, indebtedness among the workers is deliberately encouraged by those who find it a convenient way of tying the
workers, and even their families, to their jobs. Once a wage
earner is in debt the chances are that, in view of the often
exorbitant rates of interest charged by private money-lenders,
he will become more and more deeply involved, until he may
even lose part of his personal freedom. One possible way of
counteracting this process consists of limiting the amount that
can legally be seized from the worker's earnings for the repayment of debts, in such a way that the wage earner will be left
with enough to pay for his current needs. A similar safeguard
is the limitation of the amount that may be deducted by the
employer from the worker's earnings as a penalty for bad
or negligent work or for breaches of discipline and as compensation for damage to the employer's property, or for the payingoff of debts incurred in stores operated by the employer.
The broad aim of wage policy with respect to malpractices
in the payment of wages is to ensure that the worker actually
receives what he has earned. As long as malpractices exist,
measures affecting the determination of wages are likely to
have only a limited effect ; they should therefore be closely
co-ordinated with measures designed to abolish malpractices,

OBJECTIVES OF WAGE POLICY

43

if not actually preceded by them. A number of Asian countries
have already adopted such measures, some of which will
be mentioned in Chapter III. *
T H E FIXING OF MINIMUM WAGES

In most Asian countries the majority of wage earners are
in a very weak position in the labour market. The first and
most important cause of this condition is the large and rapidly
increasing surplus population on the land, which provides the
labour market with an almost inexhaustible supply of unskilled
labour. This, incidentally, is also one of the most important
causes of the low level of labour productivity in these countries.
Opportunities for employment, on the other hand, are
increasing slowly and the resulting keen competition for jobs
keeps wages low. Furthermore, the comparatively recent
development of trade unions has not yet gone far enough to
give effective support to the large masses of workers in such
industries as agriculture and the handicrafts. For example,
in India, where landless agricultural labourers with their
dependants are about as numerous as the combined populations of France and the United Kingdom, the membership
of agricultural unions is only about 5,000.2
In some countries the ignorance and illiteracy of the
workers add to the weakness of their position.
Protection of the workers against the consequences of their
weak bargaining strength through minimum wage regulation
seems to have been accepted as a major objective of present-day
wage policy in Asian countries. Thus, the preparatory Asian
Regional Conference in 1947 considered that " with a view to
achieving a living wage for every worker, every effort should
be made to improve the wage standards in industries and
occupations where they are still low ". 3 The Asian Advisory
Committee of the International Labour Organisation meeting
in December 1950 agreed that the immediate need in Asia
was for a minimum wage structure which would secure a
reasonable living standard, from which should emerge, as the
economy developed, proper living standards, including a fair
1
The Philippines is one of the countries that have ratified the Protection
of Wages Convention, 1949.
2
United Nations, Department of Economic Affairs : Economic Survey
of Asia and the Far East, 1950 (New York, 1951), p. 100.
3
Official Bulletin, Vol. X X X , No. 3, 15 Nov. 1947, p . 179.

4

44

WAGE POLICY IN ASIAN COUNTRIES

share for labour through rising productivity. The Asian
Eegional Conference of 1950 recommended that minimum
wage fixing machinery should also be established for agriculture, though minimum wage regulation should be " restricted
to undertakings of such size as renders enforcement practicable "-1 Finally, the Asian Eegional Conference held in
Tokyo in 1953 considered that " it should be the common
objective of governments, employers and workers to establish
wages at the highest possible level which the economic condition of each country permits and that in future such wages
should aim to provide the worker with a fair share of the
increased prosperity of the country as a whole resulting from
economic development " ; and that " pending the general
development of effective systems of collective negotiation in
each country, there is a pressing need for the immediate introduction of statutory measures to regulate wages in occupations
in each country in which collective bargaining is not effective
or is non-existent and as a preliminary step towards the
development of systems of collective negotiation ".2
The objectives of minimum wage policy may be more or
less far-reaching. The regulation adopted may aim at fixing
the minimum wage in a particular industry at about the average level already prevailing in that industry so as to ebminate
the payment of exceptionally low wages in individual firms.
Or a uniform minimum wage may be fixed for a group of
industries, again at about the average level already prevailing
in these industries taken together, in which case the wages
paid in particular occupations or whole industries may have
to rise substantially. Again, the regulation may be designed
to raise real wages in all industries above their current level.
Clearly, these various possible objectives raise increasingly
difficult problems of providing the economic resources from
which a " reasonable " standard of living, however that may
be defined, can be supported without reducing employment
or at least without adverse effects on the rate of capital formation for general economie development.
While it seems to be generally agreed that the first task
of protective wage policy in Asian countries is to provide
1
Industry and Labour (Geneva, I.L.O.), Vol. I l l , No. 7, 1 Apr. 1950,
p. 251.
2
Ibid., Vol. XI, No. 1, 1 Jan. 1954, pp. 30-32. The complete text of
the resolution is reproduced in the Appendix.

OBJECTIVES OF WAGE POLICY

45

minimum wage legislation, there is also fairly general agreement that minimum wage regulation is only a second best,
and that wage determination on the basis of collective bargaining is to be preferred. Thus the preparatory Asian Eegional
Conference of 1947 stressed that collective agreements are
" normally the most satisfactory means for the adjustment of
wages " and requested " the Governments of Asian countries
to assist, by all means in their power, the conclusion of collective agreements wherever feasible... ". Similarly the Asian
Eegional Conference of 1950 recommended that " measures
should be taken to safeguard the freedom of association of
workers and employers and to encourage the growth of workers'
and employers' organisations " with a view to the eventual
creation of conditions in which agricultural wages may be
effectively regulated by collective bargaining instead of by
minimum wage fixing machinery. In 1953 the third Asian
Eegional Conference considered that " collective agreements
between employers and workers are normally the best means
for the determination and adjustment of wages, and the development as soon as possible of free associations of employers
and workers and systems of collective negotiation based on
such associations, if possible on an industry-wide or regional
basis, or both, should be actively promoted and encouraged
by all concerned ".
The encouragement of trade unionism and collective bargaining is thus seen to be one of the immediate objectives of
(indirect) wage policy in Asian countries. This does not mean
that direct government intervention in wage determination
through the fixation of minimum wages should not be considered an urgent task. The growth of workers' and employers'
organisations and the development of collective bargaining are
likely to take some time ; and it would therefore seem that
in the near future governments which are concerned about
workers' living standards will have to rely more heavily on
direct action while simultaneously building up machinery
through which the parties directly concerned will eventually
be able to determine wages themselves.
A further point to be kept in mind when measures of wage
regulation are being considered is the relation of such measures
to developments in other fields of social policy, such as social
insurance, family allowances, free education, and hours of
work and overtime payment. In some of these fields, notably

46

WAGE POLICY IN ASIAN COUNTRIES

social insurance and hours of work and overtime payment,
labour legislation has already shown substantial progress since
the war in most countries of the region. 1 While a discussion
of these matters would be beyond the scope of the present
report it may be suggested here that government activities in
the field of wage policy should be carefully co-ordinated with
those in other fields of social policy. There are two main reasons why such co-ordination is desirable. First, the costs of
social benefits have, in general, to be borne either by employers
or the government, or by both. If they are borne by employers
the problem of industry's capacity to pay wage costs has to
be taken into consideration from the point of view of the
total financial implications of minimum wage and other social
regulations taken together. Secondly, in determining minimum
rates of pay sufficient to guarantee the worker a reasonable
standard of living, the authorities responsible must of necessity
take account of existing or planned non-wage benefits accruing
to the workers, since these benefits are themselves important
elements in the standard of living of those who enjoy them.
Another consideration in this connection is that a high
level of non-wage benefits may, by limiting the share of wages
proper in the workers' total remuneration, reduce the scope
and effectiveness of incentive payments. It is known, for
example, that the existence of large flat rate dearness allowances has substantially blurred the effectiveness of systems of
payment by results in the Indian textile industry.
A precise statement of the objectives of minimum wage
policy as indicated in the above-mentioned resolutions must
deal with at least the following points : (a) the level of the
minimum wage to be determined ; (b) the categories of workers
to be covered ; and (c) the way in which the level of the statutory minimum wage should be adjusted to changes in the social
and economic conditions of the country, such as changes in the
cost of living and increases in general welfare as a result of
economic development. Some of the problems involved in
these three questions are discussed in Chapter IV below.
WAGES AND ECONOMIC DEVELOPMENT

The first objective of wage policy in Asian countries is to
ensure that the level of wages will be sufficiently high to
1

Cf. Economic Survey of Asia and the Far East, 1950, op. cit., pp. 80 fi!.

O B J E C T I V E S OF WAGE

POLICY

47

enable the workers to maintain a reasonable standard of living.
What living standards can be called reasonable depends, of
course, to a large extent upon the real income per head of the
country. More precisely, the level of wages which it is attempted to establish by means of direct and indirect measures
of wage policy will be related to the current supply of essential
consumers' goods. The larger this supply, the higher the level
of real wages can be. The resolutions quoted in part above
suggest that minimum wage regulation in Asian countries
might also be instrumental in raising the wage level in accordance with improvements in general economic conditions,
through higher productivity or otherwise.
In several Asian countries the present level of output and
imports of essential consumers' goods is still distressingly low
and the first necessary condition of a substantial improvement
of workers' living standards is therefore a considerable increase
in the production of these goods. The rate at which this
production is to be raised is one of the main objects of general
policies for economic development.
It is important to ensure that wage policy is consistent
with the need for economic development and that it does not,
through lack of co-ordination of government action in different
fields, run at cross-purposes with other policies designed to
raise total output and to develop the economy.
The relations between the level and structure of wages on
the one hand and economic development on the other are
obscure and controversial even in industrialised countries,
and relatively little is known of them in the special conditions
that prevail in underdeveloped countries. It is not possible
to undertake a detailed analysis of the problem in this report,
but some general observations on the possibility and desirability of raising the national wage bill in step with progress
in economic development are submitted in Chapter V.
A second aspect of the relation between economic development and wage policy concerns the contribution that the
latter can make to the acceleration of the former. This contribution must be of such a nature as to help expand production.
This question is also briefly discussed in Chapter V.

CHAPTER I I I
EXISTING SYSTEMS OF WAGE REGULATION
In most Asian countries the attention of governments and
the activities of labour organisations tended, before the Second
World War, to be concentrated mainly on organised industries,
including factories subject to legal regulation, mines, transport
and plantations. Accordingly wage earners in these industries
who, as was noted in Chapter I, form only a small part of the
wage-earning population, enjoyed a measure of protection and
support that was not available to workers in agriculture,
unregulated small industrial establishments, handicraft and
cottage industries, commerce and domestic service.
Developments during and since the war led governments
in a number of Asian countries to take a more active part in
wage determination and to assume wider responsibilities for
the payment of suitable wages. A number of new sovereign
States have come into existence, with governments elected on
a wide franchise and responsive to popular aspirations. At
the same time there has been a strong development of social
consciousness and a genuine desire to raise the standards of
living of the poorest sections of the community. As a result
of these and other factors more attention is being given to the
living and working conditions of wage earners.
Questions of wage policy have consequently come to the
fore in virtually all Asian countries and in a growing number
of them legislation has been enacted to serve as the basis for
carrying through such policy. A wide gap still exists, however,
between the provisions of the legislation and the steps taken
to give effect to them. Some of the laws enacted have not yet
come into force while others are being applied only to a limited
extent, if at all.
That such a gap exists is not surprising. The shaping of
a new social policy—for that is what in most cases the operation
of the wage laws amounts to—needs time, especially if it has
to be done by relatively young administrations struggling with

EXISTING SYSTEMS OP WAGE REGULATION

49

a discouraging lack of financial and other resources in the
critical economic and political conditions prevailing in many
countries. In all the countries concerned wage policy, in the
sense of a well considered, precise and comprehensive approach
to wage problems in the light of clearly defined objectives of
social and economic policy, is still in a process of early and
rather slow development.
In the following sections a summary is given of the legislative and operational work already carried out under four
headings, viz : protection of wages, machinery for wage
determination, scope and methods of wage regulation and
the actual application of wage legislation.
P R O T E C T I O N OF W A G E S

Provisions prohibiting excessive deductions from wages and
other provisions designed to ensure that the worker receives
the amounts to which he is entitled are contained in the wage
laws of most Asian countries. Among other things these laws
regulate the wage period, the deductions that can legally be
made from wages, and the amount of fines and the manner in
which they may be imposed ; prohibit attachment of the costof-living allowance ; require that wages must be paid on a
working day ; prohibit employers from compelling employees
to buy goods at shops specified by them ; and impose penalties
for offences under the law. Some or all of these protective
provisions are contained, for instance, in the Payment of
Wages Acts of Burma, India and Pakistan, and in the ordinances, decrees and other wage regulations of Ceylon, Indonesia, Japan and the Philippines.
MACHINERY FOR WAGE DETERMINATION

Minimum

Wage Fixing

Burma.
The Burmese Agricultural Labourers' Minimum Wages
Act, 1948, which is not yet in force, is one of the first attempts
in Asian countries to regulate the wages of agricultural workers
paid in kind. Indeed, it prescribes payment in kind by providing that seasonal agricultural labourers (hyiwin) shall
receive a minimum wage of 35 per cent, of the produce of the

50

WAGE POLICY IN ASIAN COUNTRIES

land they work and that the employer must also feed them
during the period of employment. Payment in cash can be
agreed upon, however, provided that certain rules concerning
the computation of the money wage are observed. The wages
of other classes of agricultural labourers may be fixed by the
President at suitable rates in comparison with those of Jcyiwin
labourers.
Under the Minimum Wages Act, 1949, the President may
establish wage councils, consisting of an equal number of
representatives of employers and workers and of three independent members, in respect of any class of workers for the
regulation of whose remuneration he is satisfied no adequate
machinery exists. The councils may submit to the President
proposals for the statutory fixing of minimum wages.
Ceylon.
Under the Wages Boards Ordinance, 1941, wages boards
may be established in Ceylon, consisting of the Commissioner
of Labour, representatives of employers and workers in equal
numbers and nominated members, for the determination of
minimum rates of wages for time work in particular trades.
The boards may also determine minimum piece rates, guaranteed time rates for piece workers and overtime rates. The
boards' decisions require ministerial approval.
China.
The Minimum Wage Act adopted in China in 1936 concerned factory and home trades in which no arrangement
existed for the effective regulation of wages by collective
agreement or otherwise, and wages were exceptionally low.
In each district or municipality minimum wage committees
were to be established, consisting of one or two representatives
of the local authorities, one independent person appointed by
each of the parties (employers and workers), and representatives of the employers and workers. The Act, however, was
not applied.
Hong Kong.
The Governor of Hong Kong may, under the Trade Boards
Ordinance, 1940, fix minimum rates of wages for any trade
in any case in which he is satisfied that the minimum rates
paid are unreasonably low. He may establish, for any trade, a

EXISTING SYSTEMS OF WAGE REGULATION

51

trade board consisting of equal numbers of employers' and
workers' representatives and of appointed members whose
number must be less than half the number of representative
members. The boards are required to make inquiries in
connection with time work and recommend minimum wages
for it ; they may also recommend minimum rates for piece
work and overtime rates.
India.
The Minimum Wages Act, 1948, requires the central
Government of India or state governments to fix minimum
rates of wages for 12 scheduled, non-agricultural employments
and for agriculture. State governments may add to the
schedule any employment where in their opinion minimum
wage rates should be fixed. The central Government is
required to appoint a Central Advisory Board, composed of
equal numbers of employers' and workers' representatives
from the scheduled employments, and independent persons not
exceeding one-third of the total number of members. Similarly
composed advisory committees and subcommittees may be set
up when minimum wages are fixed for the first time and must
be appointed for the periodic revision of the rates prescribed
by the Act.
The Fair Wages Bill was introduced in Parliament in 1950,
but consideration of it has been postponed. It provides that
wages boards would have to fix minimum rates of wages
payable to employees in any class of establishment ; these
rates would have to be sufficiently high to enable the worker
to provide a standard family with food, shelter, clothing,
medical care, and education of children, appropriate to his
station in life, but the rates should not exceed the wagepaying capacity of the class of establishment concerned. Again,
they should not be less than the minimum wage if such a
wage had been fixed for the workers concerned. Fair rates of
wages would also have to be related to fair workloads ; if a
worker did not turn out a fair quantity of work his wages
could be proportionately reduced.
Japan.
Under the Conditions of Employment Act (Labour Standards Law), 1947, the " competent office " may fix minimum
wages for certain enterprises and occupations. For the purpose

52

WAGE POLICY IN ASIAN COUNTRIES

of investigating wage questions, central and local wage committees and, in case of necessity, special committees may be
established. The committees must consist of representatives
of labour, management and the public interest in equal
numbers.
Federation of Malaya.
The Wages Councils Ordinance, 1947, empowers the High
Commissioner in Council to establish wages councils, consisting
of independent and representative members, when he is of
the opinion that no adequate machinery exists for wage
regulation. Central co-ordinating committees, similar in structure to the councils, may be set up to co-ordinate the work
of wages councils dealing with allied industries. The councils
have to submit proposals to which the High Commissioner in
Council may give effect.
Philippines.
The Minimum Wage Law, 1951, empowers the Secretary
of Labour of the Philippines to appoint a wage board for
any industry if, after investigation, he is of the opinion that
a substantial number of employees in that industry are
receiving wages that are less than sufficient to maintain them
in health, efficiency and general well-being. The Law itself
prescribes the minimum wage rates payable to agricultural
workers for a three-year period and to non-agricultural workers
for a period of one year after its effective date. The wage
boards may not recommend for any industry a minimum
wage less than those prescribed in the Act or lower than
those prevailing on the effective date of the Act. The Secretary
of Labour must either approve or reject the boards' recommendations ; he is not permitted to modify them.
Conciliation and Arbitration in Wage

Disputes1

Arbitration is referred to as voluntary or compulsory
according to whether it is resorted to with or without the
1

See in this connection E. DATA : " Freedom of Association and
Industrial Relations in Asian Countries ", in International Labour Beview
(Geneva, I.L.O.), Vol. L X X I , No. 4, Apr. 1955, pp. 364-393, and No. 5,
May 1955, pp. 467-497.

EXISTING SYSTEMS OF WAGE REGULATION

53

consent of both parties to the dispute, though the award
or decision may in either case have binding legal effect.
Voluntary arbitration is a method of settlement used in
Hong Kong, the Federation of Malaya and Singapore and
compulsory arbitration in Burma, the Philippines and VietNam. Both methods are employed in Ceylon, India, Indonesia,
Japan, the Republic of Korea and Pakistan.
In most countries where voluntary arbitration is employed
proceedings can only be instituted by the competent authority,
and the parties' consent to arbitration is generally obtained
after a dispute has arisen. In both Japan and the Eepublic
of Korea the parties may apply directly to the permanent
arbitration machinery to settle their dispute ; their consent
may also be given in advance by means of a stipulation in
a collective agreement, in which case it is sufficient for one
party to make the request for arbitration.
As regards compulsory arbitration, the regulations in the
different countries provide for varying conditions under which
the competent authority may refer a dispute to, or proceed
to settle it by, arbitration. This method is applied in Japan
to disputes in public corporations and enterprises and in the
Philippines to disputes in industries deemed indispensable to
the national interest. In Indonesia the Central Committee
for the Settlement of Labour Disputes may resort to compulsory arbitration in the case of a dispute that affects an
important concern and may endanger the public or national
interest.
In Burma and Ceylon all disputes of a serious character
may be referred to compulsory arbitration, but generally in
these countries, as well as in India, the Eepublic of Korea
and Pakistan, the competent authority has discretionary powers
to resort to compulsory arbitration. Moreover, in India and
Pakistan the competent authority is required to refer a dispute
to compulsory arbitration if it involves a public utility and
notice of a proposed strike or lockout has been given by
either party, even if other proceedings for the settlement of
the dispute have been started.
In most countries, however, compulsory arbitration is a
last resort. In Viet-Nam, in particular, it is applied only
when conciliation fails. In Ceylon referral to compulsory
arbitration is conditional upon the parties' not being able
to agree to voluntary arbitration.

54

WAGE POLICY IN ASIAN COUNTRIES

Burma.
The Trade Disputes Act, 1929, as amended in 1947, 1948,
1950 and 1951, provides for the investigation and settlement
of trade disputes through courts of inquiry and boards of
conciliation, the former consisting of one or more independent
persons, the latter of an independent chairman and members
who may be independent or may represent the parties. A Court
of Industrial Arbitration, consisting of independent members,
has been established under the Act. It may make awards
binding all parties to the dispute. Penalties are provided
for non-compliance by either party with the terms of such
awards. The Act prohibits strikes and lockouts without notice
in certain public utility services.
Ceylon.
Under the Industrial Disputes Act, No. 43 of 1950, when
an industrial dispute exists or is apprehended, the Commissioner
of Labour has to take, after inquiry, the steps necessary for
settlement. He may endeavour to settle the dispute himself,
or refer it to a conciliation officer, propose arbitration, or
refer it to an industrial court for arbitration even without
the consent of the parties. A request for the replacement
or the alteration of an award will be examined only if the
Commissioner deems that the economic situation warrants such
request. Strikes and lockouts are forbidden in essential
industries unless at least 21 days' notice is given.
India.
Under the Industrial Disputes Act, 1947, the appropriate
government (i.e. the central Government or a state government) may refer any existing or apprehended dispute to a
court of inquiry, consisting of independent persons. Alternatively it may refer the dispute to a tripartite board of
conciliation empowered to promote a settlement or to an
industrial tribunal, composed of independent members, for
adjudication. An award of a tribunal may be enforced either
wholly or in part for a period not exceeding one year. Conciliation is compulsory in all disputes in public utility services and
optional in other cases. State governments may declare any
industry mentioned in a schedule attached to the Act to be a
public utility service. While conciliation and adjudication

EXISTING SYSTEMS OF WAGE REGULATION

55

proceedings are in progress and during the period when
settlements and awards are in operation, strikes and lockouts
are prohibited. Moreover in public utility services any stoppage
of work without 14 days' notice is forbidden. In 1950 a Labour
Appellate Tribunal for hearing appeals from the awards or
decisions of industrial tribunals was set up.
Indonesia.
The Emergency Law concerning Labour Disputes, 1951,
which is intended to be a temporary measure, provides for
the settlement of labour disputes through mediation officials
of the Ministry of Labour, committees for the solution of local
labour disputes, arbitrators and arbitration councils, a Central
Committee, and the Minister of Labour. The Central Committee, which is of great practical importance, consists of the
Minister of Labour as chairman, and a number of other ministers
as members. The local committees consist of representatives
of various ministries.
If parties to a dispute cannot settle it between themselves,
they must inform the competent mediation official who, if he
finds himself unable to solve it, must transfer the dispute to
the local committee. If the latter cannot solve it either, the
dispute may be referred to the Minister of Labour or to the
Central Committee. Three weeks' notice must be given of
strikes and lockouts ; if necessary the Central Committee
may extend this period.
Japan.
The Labour Belations Adjustment Act, 1946, contains
rules of procedure governing mediation and arbitration by
labour relations commissions, established under the Trade
Union Law, 1949. The commissions consist of an equal number
of persons representing employers, workers and the public
interest. In the case of disputes the commission concerned
must set up a tripartite mediation committee on which employers and workers are equally represented. Arbitration is to
be carried out by the commission itself ; its awards are binding.
In essential industries strikes, slowdowns and lockouts are
prohibited until 30 days have elapsed after a request for
mediation, which is compulsory in these industries.
Special provisions for public corporations are contained
in the Public Corporation and National Enterprise Labour

56

WAGE POLICY IN ASIAN COUNTRIES

Eelations Law, 1948, and for public utility services in the Local
Public Enterprise Labour Eelations Law, 1952.
Federation of Malaya.
Under the Industrial Courts Ordinance, 1948, the Commissioner of Labour may refer for settlement to the standing
Industrial Court any existing or apprehended dispute. The
Court consists of independent persons as well as employers'
and workers' representatives. Alternatively the dispute may
be referred to the arbitration of one or more persons appointed
by the Commissioner, or to a board of arbitration consisting
of an independent chairman and equal numbers of employers'
and workers' representatives. According to the Trade Disputes
Ordinance, 1949, strikes and lockouts may not be declared in
public utility services without notice, or while conciliation
proceedings are pending.
Pakistan.
The Industrial Disputes Act, 1947, was taken over from
pre-partition India, and was amended in 1948 to add certain
services and undertakings to the schedule of public utility
services.
Philippines.
The Court of Industrial Eelations Act, 1936, provides for
the appointment of a Court of Industrial Eelations, consisting
of a presiding judge and four associate judges, for the settlement
of disputes affecting employers and employees or landlords
and tenants. Before hearing the dispute the Court has to
attempt conciliation. Pending investigation, settlement or
arbitration by the Court, strikes are not permitted.
The Act to Promote Industrial Peace, 1953, substantially
modifies previous legislation dealing with labour organisations
and the settlement of industrial disputes. I t limits compulsory
arbitration in that it provides that no court shall have the
power to set wages, rates of pay, hours of work, or other
conditions of employment except where provided by law.
It thus cancels a provision in the Court of Industrial Eelations
Act, 1936, to the effect that a dispute involving more than
30 workers could be submitted to the Court of Industrial
Eelations for arbitration by the Secretary of Labour or by
either or both of the parties.

EXISTING SYSTEMS OF WAGE REGULATION

57

When in the opinion of the President of the Philippines
there exists a labour dispute in an industry indispensable
to the national interest and such dispute is certified by the
President to the Court of Industrial Relations, the Court
may forbid the employees to strike or the employer to lock
out any employees pending investigation by the Court, and
if no other solution to the dispute is found the Court may
issue an order fixing the terms and conditions of employment.
The Act leaves the right to strike or to lock out otherwise
untouched.
The Act establishes an advisory Labour-Management
Council in the Department of Labour, to be composed of a
member representing the public and equal numbers of representatives from management and labour. The Council will
advise on the avoidance of industrial disputes and on questions
of mediation and arbitration.
The President of the Philippines may, from time to time,
call a national conference of representatives of employers and
workers for the consideration and adoption of voluntary
codes of principle in regard to management-labour relations
designed to prevent or minimise industrial disputes. The
Secretary of Labour is also authorised to call, from time to
time, a conference of representatives of employers and workers
in any industry or region for the same purpose.
SCOPE AND METHODS OF W A G E REGULATION

Coverage of the Laws
Some of the minimum wage laws and decrees mentioned
in the previous section indicate only in very general terms
the workers they are intended to cover. Others are limited in
scope to specified territories, industries or occupations. For
example, in India and Japan the classes of industries in which
minimum wages may or must be fixed are listed in schedules ;
in India the schedule may be extended. On the other hand,
some of the laws explicitly exclude certain categories of
workers. Thus the Burmese Minimum Wages Act does not
apply to persons employed casually and otherwise than for
the purpose of the employer's business, or to government
officials. In the Philippines employees of retail or service

58

WAGE POLICY IN ASIAN COUNTRIES

establishments which employ not more than five wage earners,
those employed on farms of 12 hectares or less, and domestic
servants are not covered by the Minimum Wages Law. In
India the Government " shall not be required " to fix minimum
wages even for scheduled employments, when the total number
of workers concerned in the state is less than one thousand.
Apart from the formal exclusion of workers covered by other
regulations, such as agricultural labour in Burma and government officials in Japan, the object of such exemptions in most
cases is obviously to limit wage regulation to employments
in which enforcement would be practicable.
A related question concerns the employment of certain
categories of workers—women, apprentices and physically
handicapped workers—at wages lower than the general
minimum rates fixed.
With regard to wage differentials by sex most Asian
wage laws are silent with the exception of the Philippines
Minimum Wages Law and the Indian Fair Wages Bill, both
of which stipulate the principle of equal pay for equal work.
Various laws provide for special treatment of apprentices.
In India different minimum rates may be fixed for adults,
adolescents, children and apprentices. In the Philippines the
Secretary of Labour is authorised to issue special certificates
permitting the employment of learners or apprentices at wages
lower than the applicable minimum though generally not lower
than 75 per cent, of the minimum.
With respect to physically deficient workers the Burmese
wage councils may grant permits authorising employment at
less than the statutory minimum remuneration. In Ceylon
similar permits may be issued by the Commissioner of Labour
or any officer authorised by him, while in India the appropriate
government may direct that minimum wage regulations shall
not apply to the wages payable to disabled employees. In the
Philippines the Secretary of Labour may provide for the employment of disabled persons at a reduced wage, which may in
no case be lower than 50 per cent, of the applicable minimum.
Factors To Be Considered in Determining
The Level of Minimum Wages
It follows from the very purpose of minimum wage regulation that one of the main criteria for the fixing of minimum

EXISTING SYSTEMS OP WAGE REGULATION

59

rates should be the cost of maintaining a certain standard of
living. The second principal factor is, of course, industry's
capacity to support a particular wage level. While several
laws and decrees mention the criterion of a minimum standard
of living, most of them are silent on capacity to pay. I t is in
effect left to the wage boards and councils to determine to what
extent conditions in the industry or industries concerned
permit the raising of exceptionally low wages to a level sufficient to ensure to the workers a certain minimum standard of
living.
The various laws and decrees are designed primarily to
create the necessary machinery for fixing minimum wages and
do not attempt to specify at all precisely at what levels these
wages should be fixed. The Burmese Minimum Wages Act
prescribes that the minimum wage should enable the workers
" to maintain themselves suitably " ; in Japan it must be such
as to " meet the need of the worker who lives a life worthy of
human being " ; in the Philippines the minimum wage should
be " as nearly adequate as is economically feasible to maintain
the minimum standard of living necessary for the health,
efficiency, and general well-being of employees ".
The translation of such general formulae into actual wage
rates is a difficult task and progress in this respect has necessarily been rather slow. A number of the problems involved
will be discussed in some detail in Chapter IV.
Some Asian wage laws also provide for the periodic revision
of minimum wage rates in order to adjust them to changing
conditions, in particular to changes in the cost of living. In
Ceylon and India any minimum rate of wages may consist of
a basic rate and a special allowance to be adjusted, at such
intervals and in such manner as the appropriate authority
may direct, to accord as nearly as possible with the variations
in the cost-of-living index applicable to the workers concerned.
In India the appropriate government is also required to review
the minimum rates fixed at such intervals as it thinks fit, but
not exceeding five years, and to revise them if necessary.
In a few laws indications are given concerning the way in
which actual remuneration has to be computed for comparison
with the minimum rates fixed. Under the pre-war Chinese law,
for example, board and lodging supplied by the employer might
be included at their value, averaged over the preceding three
months ; but bonuses, allowances and extra pay for overtime

5

60

WAGE POLICY IN ASIAN COUNTRIES

could not be taken into account. In the Philippines the wages
paid to any employee also include " the fair and reasonable
value, as determined by the Secretary of Labour, of board,
lodging, or other facilities customarily furnished by the
employer to the employee ".
Other Bules of Operation
While most of the laws and decrees do not specify the
dates at which minimum wage regulations have to come into
force, some do. In India the Government is required to fix
the minimum wages, in the case of employments specified in
the original schedule attached to the law, before the expiry
of three years from its promulgation, and in the case of an
employment subsequently added to the schedule, two or three
years from the date of notification, according to whether the
employment concerned is or is not agricultural. The Malayan
Wages Council Ordinance declares that it is to come into
force on 1 September 1947. The Minimum Wages Law of
the Philippines, which came into effect on 4 August 1951 except
for government employees, prescribes specific minimum wage
rates from the effective date of the Act.
A number of the laws provide an opportunity to persons
likely to be affected by decisions on minimum wage rates to
raise objections against proposed regulations. In Burma,
Ceylon, India, Japan and the Philippines the competent
authority has to publish its proposals, and specify a date up
to which objections will be considered.
Wage legislation in Ceylon, India and the Philippines
renders null and void any contract or agreement stipulating
wages lower than those fixed by wage regulations. Moreover
most of the wage laws lay down the penalties that may be
imposed on persons who fail to comply with their provisions.
In Burma, Ceylon, Hong Kong, India, the Federation
of Malaya and the Philippines fines, imprisonment or both
may be imposed for offences in connection with the keeping of records or the non-payment of prescribed minimum
wages.
I t may be noted that the Payment of Wages Acts of Burma,
India and Pakistan also provide for penalties for non-observance of the rules relating to wage periods, payment in cash,
deductions, and like matters.

EXISTING SYSTEMS OF WAGE REGULATION

61

In Burma, Ceylon, Hong Kong, India, the Federation of
Malaya and the Philippines provision is made for the appointment of inspectors or the creation of special inspection services.
The inspectors are usually authorised to examine registers,
records of wages and notices required to be kept or exhibited ;
and to examine employees and require them and their
employers to supply information with respect to wage payments.
APPLICATION OF WAGE LEGISLATION

Minimum

Wage Legislation

Agriculture.
Actual wage regulation in Asia lags rather far behind
legislation. This is particularly true of wage regulation in
agriculture, where practical difficulties are serious.
In Burma the Agricultural Labourers' Minimum Wages
Act, 1948, is not in force at present. The cultivation of crops
has been seriously affected by insurgent activities and in these
circumstances the Government has had to postpone the
enforcement of its minimum wage legislation. In areas where
normal conditions and agricultural production have been
restored, wages are usually determined, as before the war,
by voluntary agreements.
When introducing the Minimum Wages (Amendment)
Bill, 1951, the Indian Government stated that most state
governments had been unable to fix minimum wage rates in
agriculture within the time prescribed by the 1948 law, namely
before 15 March 1951. In view of the difficulties encountered
the central Government had concluded that state governments
should be allowed some discretion in the matter, particularly
as regards the date of enforcement and the areas and workers
to be covered. This latitude has been taken advantage of and
some state governments have fixed minimum wages for a part
of the state only, while some have excluded farms below a
certain size. The time limit for the fixing of minimum wages
in agriculture was extended until 31 December 1953.
The Ministry of Labour of the Government of India has
undertaken, in collaboration with the state governments, a
country-wide inquiry into the conditions of agricultural
workers with the purpose of introducing measures, includ-

62

WAGE POLICY IN ASIAN COUNTRIES

ing the fixation of minimum wages, to improve these conditions. 1
In the course of the 13th Session of the Indian Labour
Conference (Mysore, January 1954), a paper on wage fixing
machinery reviewed the efforts that had been made to apply
the Minimum Wages Act, 1948. The Planning Commission had
recommended in the First Five-Tear Plan that " full and
effective implementation of minimum wages legislation
should be secured ", and that " the enforcement of minimum
wages for agricultural workers in low wage pockets, for the
larger farms and in areas selected for intensive development
should be regarded as an important aspect of the programme
for improving the conditions of agricultural workers and should
receive high priority ". It had, however, suggested that " in
view of the paucity of data and the administrative difficulties
pointed out by various state governments, a limited beginning
should be made with regard to the fixation of minimum wages
for agricultural workers, and the scope should be extended
further as experience is gained ".2 The memorandum stated
that in view of the importance of implementing the measures
and in the fight of the recommendations of the Planning
Commission, substantial progress in the fixation of minimum
wages should be gradually achieved in as many areas as
possible. Because of the difficulties involved, however, particularly with regard to the collection of the necessary information and to the short time available for those states to which
the Act was last applied, it was proposed to amend the Act so
as to extend the time limit for the fixation of minimum wages
in areas where the Act was not yet fully implemented to
31 December 1954 for both agriculture and non-agricultural
activities. 3
The Minimum Wages Act provides for the review of the
minimum wage rates at intervals not exceeding five years.
1

Some results of a preliminary investigation were reproduced in table IV
(p. 17). Meanwhile agricultural minimum wages have been fixed for the
whole state in the states of Ajmer, Bilaspur, Coorg, Delhi, Himacbal Pradesh,
Kutch (farms below 5 acres being excluded), Pattala and East Punjab
States Union, Punjab, and Rajasthan. Minimum rates of wages in a part
of the state have been fixed in the states of Assam (Cachar district), Bihar
(Patna district), Uttar Pradesh (12 districts, only farms over 50 acres being
covered) and Vindhya Pradesh (Sidhi district).
2
Government of India, Planning Commission : The First Five Year
Plan (New Delhi, 1952), pp. 206 and 585.
3
The time limit was subsequently extended to 31 December 1954.

E X I S T I N G SYSTEMS OF WAGE R E G U L A T I O N

63

In this respect the paper issued at the Mysore Conference
stressed the need of suitable index numbers of the cost of
living in rural areas. A scheme for the preparation of cost-ofliving index numbers for rural areas was under consideration.
In Ceylon minimum wage regulations are issued by the
wages boards for the tea and rubber plantations, as well as
the coconut growing and manufacturing trades.
The data given in table VIII on wage rates and the cost
of living indicate that since 1939 the former have risen faster
than the latter. The improvement in the condition of the
estate workers in particular is largely attributed to the successful operation of the wages board machinery and the activities
of the trade unions operating in the plantations.

TABLE V I I I . AVERAGE D A I L Y WAGE KATES AND I N D E X N U M B E R S
OP M O N E Y AND R E A L W A G E S I N TEA AND R U B B E R E S T A T E S I N

CEYLON, 1939-50
Average daily wage in rupees

Index numbers

Year
Men

Women

Children

Average
wages

Cost of
living

Real wages

1939 . . . .

0.49

0.39

0.29

100

100

100

1941 . . . .

0.54

0.43

0.32

109

119

92

1950 . . . .

1.78

1.39

1.21

372

274

136

Source : Ceylon Labour Gazette, Vol. II, No. 2, Feb. 1951, pp. 4-5.

The Philippine Minimum Wages Law, 1951, fixes the following minimum wage rates for agricultural workers :
(1) on the effective date of the Act and for one year thereafter, 1.75 pesos a day, no allowance for board and lodging to
reduce this wage below 1.50 pesos in cash during that year ;
(2) one year after the effective date of the Act, 2.00 pesos
a day, no allowances for board and lodging to reduce this wage
below 1.75 pesos in cash ;
(3) one year thereafter, 2.50 pesos a day, no allowances
for board and lodging to reduce this wage below 2.25 pesos
in cash.

64

WAGE POLICY IN ASIAN COUNTRIES

These rates may be compared with the average daily
wages (in pesos) of agricultural labourers in recent years,
which are as follows : 0.56 pesos in 1941, 2.05 in 1947, 1.66 in
1948, 1.73 in 1949, and 1.70 in 1950.1
On 15 January 1953 a wage board for the raw rubber
industry was created by the Secretary of Labour to study
ways and means of raising the wage level for workers in raw
rubber enterprises without causing undue hardship to the
industry.
Non-agricultural

Employments.

As a sequel to technical assistance provided to Burma by
the International Labour Office, the first wage council, for
the cigar and cheroot manufacturing industry (Rangoon and
Pegu), was established by the Government in 1953. This
council has prepared proposals for fixing minimum rates of
wages for the main processes of the industry and regulating
holidays and payment for holidays. These provisions were
the result of agreements between the representatives of the
employers and workers on the council, with the assistance of
the independent members. After sufficient experience has been
gained of the results of this first wage council, the Government of Burma plans to extend the system progressively to
other industries and other parts of the country.
It appears that the minimum wage rates fixed by the
Government from time to time for its own employees tend also
to have the effect of minima in private industry, though not
in agriculture and the unorganised traditional industries.
As from 16 February 1947 the minimum monthly wage of
government employees in Burma was put at 35 rupees flus
cost-of-living allowance ; as from 1 March 1951 the minimum
wage was raised to 40 rupees plus a cost-of-living allowance
varying for different categories of workers.
A survey of average monthly wages of permanent workers
in a number of selected industries in Burma showed that wages
ranged, by June 1951, from 45 rupees in fodder manufacturing
to over 90 in rice milling, 164 in soap manufacturing, 183 in
oil winning and over 233 in banking. 2
1
See Abstract of Philippine Statistics, Jan.-Mar. 1951, op. cit., p. 8.
Besides the money wage, agricultural labourers receive two free meals.
2
Burma Labour Gazette, Vol. V, No. 2, Feb. 1952, p . 11.

65

EXISTING SYSTEMS OF WAGE REGULATION

I n Ceylon a sample survey of wage changes for nonplantation workers in coconut manufacturing and tea and
rubber export, for which wage boards have been established
and minimum wages fixed, gives the figures shown in table I X
for the period from 1939 to 1950.
TABLE IX. INDEX NUMBERS OF MONEY AND REAL WAGES OF
WORKERS OTHER THAN THOSE ON PLANTATIONS, CEYLON,

1939-50
Year

1939
1944
1945
1946
1947
1948
1949
1950

Average
•wages

Cost of living
(Colombo working
class)

Real
wages

100
198
274
276
294
301
301
313

100
185
205
212
233
241
239
252

100
107
134
130
126
125
126
124

Source : Ceylon Labour Gazette, Vol. II, No. 2, Feb. 1951, p. 7.

It will be noted from table IX that a significant increase in
both money and real wages occurred in 1945, the year in which
wage boards fixed minimum wage rates for these workers.
The greater part of the increase in real wages then secured
has been retained, in spite of the continuing rise in the cost
of living.
The index of real wages for these workers in 1950 was
24 per cent, higher than in 1939. It is probable that the
upward trend of the wage level in these trades, for which wage
boards have been established, has contributed to the rise in
wage rates in other occupations as well. Wages of unskilled
workers in government service have also risen substantially.
Average monthly wage rates for this group increased from
16.16 rupees in 1939 to 83.11 rupees in 1950, that is by over
400 per cent.
In India the Minimum Wages (Amendment) Act, 1951,
mentioned in the previous section, extended the time limit by
which minimum wages should be fixed in non-agricultural
employments to 31 March 1952. Although no precise information is available, it is known that several state governments
have been active in giving effect to the Minimum Wages Act.

66

WAGE POLICY IN ASIAN COUNTRIES

For example, committees of inquiry have been set up in
Bombay State (public motor transport) and Mysore (textile
mills). The Government of Orissa appointed an Advisory
Board to assist it in the fixing and revising of minimum wages
and to co-ordinate the work of the committees and subcommittees that may be appointed under the Act.
Proposals for minimum wage rates have been published by
the Governments of Ajmer (snuff and bidi making), Madras
(tanneries and leather manufacturing) and Madhya Pradesh
(rice, flour and dal mills, local authorities, road construction
and building, stone breaking and crushing).
In several states minimum wage rates have actually been
fixed : in the Punjab for woollen carpet making and shawl
weaving, tanneries and leather manufacturing, rice, flour
and dal mills, road construction and building operations,
stone breaking or crushing, and oil mills, and for local authorities ; in Madras for rice, flour and dal mills, oil mills and tobacco manufacturing ; in Madhya Pradesh for tobacco manufacturing, public motor transport, oil mills, the cement industry,
potteries and the glass industry ; in West Bengal for rice and
flour mills ; in Bihar for woollen carpet making and shawl
weaving, rice, flour and dal mills, bidi making, oil mills, road
construction and building operations, stone breaking or
crushing, public motor transport, tanneries and leather
manufacturing ; in Ajmer for tobacco manufacturing ; in
Delhi for flour and dal mills ; and in the Andaman and Mcobar
Islands for timbering operations.
Mention should also be made of the measures taken by the
Indian Government to ensure that fair wages are paid to contract labour engaged on the work of the Central Public Works
Department. Previously, a fair wage clause in the standard
agreement for the Department's contracts had provided that
the contractor should pay his workers not less than the wages
paid for similar work in the neighbourhood. Under a revised
clause the daily wage to be paid is the one notified, at the time
of calling for tender, as the prevailing wage in the locality.
If no such wage is notified, the " fair " wage is prescribed by
the Department for the district in which the work is done. A
request was made to all state governments to consider adoption
of similar provisions for employment on their public works.
The memorandum submitted to the 13th Session of the
Indian Labour Conference referred to above (p. 62) dealt

EXISTING SYSTEMS OP WAGE REGULATION

67

also with the need for setting up wage boards for particular
industries. The Planning Commission had indicated that " for
important industries separate wage boards would be found
very helpful ". It had recommended that " permanent wage
boards with a tripartite composition should be set up in each
state and at the centre to deal comprehensively with all
aspects of the question of wages, to initiate necessary inquiries,
collect data, review the situation from time to time and take
decisions regarding wage adjustments suo moto or on reference
from parties or from the Government ". 1
In 1950 the Government of Japan decided to establish a
Central Wage Council, which in the following year reached
decisions on : (a) the establishment in principle of minimum
wages on a dual system, one designed to cover workers in the
majority of industries and the other to cover workers in lowerwage industries ; (b) the establishment of minimum wages
first for the lower-paid categories ; and (c) a study to be
undertaken concerning minimum wages for domestic workers.
After careful consideration it was decided in 1952 to
establish " special deliberation councils " for each of the
following industries in which relatively low wages were paid :
silk and rayon weaving, furniture and fixtures, Japanesepaper manufacturing and dupion yarn reeling. The special
deliberation councils were to submit to the Central Wage
Council reports on the conditions surrounding the establishment of minimum wages.
In the Philippines the Minimum Wages Law came into
effect only on 4 August 1951. The minimum rates prescribed
by the Act for employees who are employed by an enterprise
other than in agriculture are as follows (a) 4.00 pesos a
day on the effective date of the Act and thereafter, for employees of an establishment located in Manila or its environs ;
and (b) 3.00 pesos a day on the effective date of the Act and
for one year after the effective date, and thereafter 4.00 pesos
a day, for employees of establishments located outside Manila
or its environs.
The figures in tables X and XI enable some comparison
to be made between the prescribed minimum wage rates and
the average wage rates for the period preceding the fixing of
the minimum wage rates.
1

The First Five Year Flan, op. cit., pp. 579 and 585.

68

WAGE POLICY IN ASIAN COUNTRIES
TABLE X. AVERAGE DAILY WAGE RATES OP INDUSTRIAL
WORKERS IN THE PHILIPPINES, 1 9 4 0 - 5 0
(pesos)
1940

1946

1947

1948

1949

1950

1.41
0.96

3.21
1.78

3.29
1.87

3.34
1.89

3.52
2.03

3.46
1.87

1.41
Central Luzon including Zambales 1.47
Southern Luzon : Bicol including
1.37
1.26
1.53

2.93
4.12

3.00
4.19

3.06
4.08

3.08
4.18

3.16
4.21

4.12
2.70
2.62

4.35
2.91
2.66

4.27
3.08
2.77

4.39
3.27
3.19

4.27
3.07
3.07

Region

Whole country :
Skilled
Luzon : Hocos including mountain

Source : Abstract of Philippine Statistics, Vol. I, No. 2, Jan.-Mar. 1951, op. cit., p. 10.

TABLE XI. WAGE RATES OF LABOURERS IN
INDUSTRIAL ESTABLISHMENTS IN MANILA, 1 9 4 1 - 5 0
(pesos)
Year

1941
1946
1947
1948
1949
1950
Source : Abstract o/ Philippine

Skilled
labourer

Unskilled
labourer

2.29
6.73
7.54
7.47
7.61
7.59

1.24
4.53
4.66
4.69
4.90
4.29

Statistics, Vol. I, No. 2, Jan.-Mar. 1951, op. cit., p. 10.

A Wage Administration Service has been set up primarily
to take over the responsibility of administering the Minimum
Wage Law. A wage board was appointed to make investigations in the mining industry in order to determine whether or
not to extend the application of the minimum wage for six
months after 4 August 1952. It is stated that some 25,000
mineworkers in about 29 producing mining firms will be
affected by the decision of the board. In response to a petition
of the Lumber Producers' Association on behalf of its 29
lumber company affiliates, a wage board for the lumber
industry was created on 11 July 1952.1
1

According to the latest available data, there are 342 sawmills in the
country and it is estimated that the mdustry employs about 70,000 workers.

EXISTING SYSTEMS OF WAGE REGULATION

69

In Indonesia, Pakistan and Thailand, wage rates are fixed
by individual or collective agreements and awards or decisions
of industrial tribunals. However, the Governments, in their
capacity as employers, fix minimum wage rates for workers in
government service. For instance, in Indonesia the Government decided to increase the minimum wage rates of labourers
employed by the provincial and local administrations in Central
Java with effect from 1 January 1952. According to this
decision, wages under 3.50 rupiahs a day were increased to
4.50 rupiahs, while wages from 3.50 to 4.50 rupiahs were
increased by at least 0.75 rupiahs per day to a maximum of
5.50 rupiahs. The minimum wage of women was increased
from 2.80 to 3.60 rupiahs.
In Pakistan the Government has adopted measures to
ensure the payment of " fair wages " to workers employed by
contractors in the Public Works Department on government
works. A fair wages clause and the " Pakistan P.W.D. Contractors' Labour Eegulations " are included in the government
Public Works Department contract forms for contractors.
Wage rates sanctioned by the Government as payable to
contract labour are inserted in the contract.
Wage Determination by Industrial

Tribunals

The machinery created in several Asian countries for the
prevention and settlement of industrial disputes has been of
considerable importance for the determination of wages and
other conditions of employment in various trades and industries. In those countries where other wage regulations are
not yet in force, this machinery usually represents the only
authority for the statutory fixing of basic wage rates, special
allowances, paid leave, etc.
As an instrument of wage policy conciliation and arbitration differ widely from minimum wage legislation. The purpose of machinery for the settlement of disputes is primarily
to avoid harmful industrial unrest rather than to improve the
lot of the lowest-paid groups of workers. Indeed, since industrial disputes usually arise only after some degree of organisation among the workers has been attained, arbitration could
hardly be of much use for the improvement of labour standards in industries which consist largely of small establishments
or in which for other reasons the labour force is unorganised.

70

WAGE POLICY IN ASIAN COUNTRIES

The judge or arbitrator may, of course, include in the considerations on which his award is based the factors underlying
minimum wage legislation, but in most cases he is not required
to do so ; still less are different adjudicators required to apply
uniform economic and social principles of wage determination
in their awards.
In a few cases the conditions under which arbitration takes
place are such as may eventually permit the development of a
real " wage policy ". For example, in Indonesia the Central
Committee for the settlement of disputes has considerable
practical influence. It is entirely composed of Ministers, while
the local committees are composed of government officers.
In such conditions arbitration might very well be used as an
instrument of government wage policy. In most Asian countries, however, industrial awards show a great diversity in the
arguments used and the decisions reached by the various
tribunals, even on almost identical questions. Unless a fair
degree of uniformity in the awards of the industrial courts
and tribunals is assured through the operation of an easily
accessible appellate tribunal, it is hardly to be expected
that any comprehensive wage policy will evolve from such
a system. 1
In some countries the increase in industrial disputes and
the profusion of committees, commissions, boards and tribunals
for settlement have given rise to some concern. In January
1953 the Burmese Minister of Labour, in an address to labour
officers and labour leaders, stated that the Government had
to intervene frequently in industrial disputes, but he was of
the opinion that disputes should be settled through direct
negotiation and collective bargaining. Such an approach, he
believed, would strengthen the trade union movement, and
thereby reduce the need for strikes. 2 Similarly, the Indian
Minister of Labour, addressing the 12th Session of the Indian
Labour Conference, said that it was far better for management
and labour to settle their differences between themselves than
to go as litigants and opponents before a labour court or
1
Beference should, in this connection, be made to an interesting publication of the Indian Ministry of Labour : Industrial Awards in India : An
Analysis (Delhi, 1951), where a large number of awards have been brought
together under various headings in order to show divergencies and parallels
and to bring out the main principles underlying the decisions of the various
labour judiciaries.
2
See Industry and Labour, Vol. IX, No. 8, 15 Apr. 1953, p. 229.

EXISTING SYSTEMS OP WAGE REGULATION

71

tribunal. Compulsory arbitration, he found, had caused the
spirit of self-confidence and self-reliance engendered by
healthy bargaining to give place to a habit of importunity and
litigation. He also mentioned the generally felt need for
reducing the multiplicity of authorities connected with the
settlement of industrial disputes. In reply to a questionnaire
on industrial relations, he had received suggestions for the
elimination of registering offices, standing conciliation boards,
commissions of inquiry, labour courts and appellate tribunals.
Bodies and authorities whose continued existence had not
been called in question were works committees or joint committees, conciliation officers, boards of conciliation, and
industrial tribunals or courts of arbitration. 1
*

*

*

As has been seen, wage legislation has been enacted in
most of the Asian countries. In an appreciable number of
them the wage regulations provide specifically for the determination of minimum wages in different trades and industries.
Burma, India and the Philippines, conscious of the particular
needs of agricultural workers, have included provisions in their
wage legislation to cover employment in agriculture. In
Indonesia and Thailand there is still no comprehensive wage
legislation in existence. In Pakistan, although there is no
minimum wage legislation, a Payment of Wages Act is in force.
The degree of enforcement and application of minimum
wage legislation, however, varies greatly. In a few countries,
Ceylon for example, wage fixing machinery has already been
established and minimum wage rates have actually been fixed
for a number of years. On the other hand, in countries such
as India and the Philippines, where the wage legislation has
come into force comparatively recently, wage fixing machinery
is in the course of being created and the determination of
minimum wage rates is being extended to cover more employments or trades. In Burma only the first steps have thus far
been taken to carry into effect the recent minimum wage
legislation.
The great majority of Asian workers, however, have still
to be covered by any form of wage regulation. This is parti1

Industry and Labour, Vol. IX, No. 3, 1 Feb. 1953, pp. 85-87.

72

WAGE POLICY IN ASIAN COUNTRIES

cularly the case in agriculture, in which wages are so low as
to leave little margin beyond mere subsistence. For the
majority of workers wages continue to be fixed by individual
agreements. A much smaller number are paid wages according
to awards made by tribunals in the course of settling disputes.
So far, collective agreements have played a very limited role
in wage determination in most Asian countries.
The few wage laws, of limited scope, which existed in some
Asian countries before the Second World War primarily
concerned wage earners engaged in organised industries such
as regulated factories, mines, transport and plantations. These
workers, who formed only a small part of the gainfully occupied,
received some legal protection, while workers in the unorganised
industries (unregulated factories and small industrial establishments, handicrafts and cottage industries, commerce, domestic
service and agriculture) remained unprotected and received
exceedingly low wages.
Since the Second World War, many governments have
enacted wage legislation not only for the organised and the
more important industries but also for workers in unorganised
industries, including agriculture.
In many of the regulations increases in the minimum wage
are related to cost-of-living index numbers. In several countries the wage consists of a rather low " basic " wage, which is
the same as or only slightly higher than the pre-war rate, plus
an allowance called " dearness allowance ", " cost-of-living
allowance ", " special allowance ", or " family allowance ",
which in quite a few cases amounts to about the same as the
" basic " wage, if not more. Where the allowance is linked
with cost-of-living index numbers, the periodic adjustment
varies from a fraction of the rise in the index to full compensation. Some of the minimum wage laws provide for the
determination of minimum wage rates by committees, boards
or councils in different areas or regions, or for certain trades
or employments.
Industrial tribunals in many Asian countries fix wages,
grant bonuses and allowances, and decide on many other
aspects of wages in the course of settling disputes. Some of
the difficulties that arise in connection with this system have
been mentioned. I t has been found, for instance, in India that
in the absence of any co-ordinating authority or guiding
principles several tribunals have expressed divergent views on

EXISTING SYSTEMS OF WAGE REGULATION

73

important issues referred to them. The varying decisions made
by tribunals in different states and sometimes in the same
state have caused discontent among both employers and
workers. Another source of dissatisfaction regarding the work
of industrial tribunals is that they can usually act only in
cases where an industrial dispute already exists or is likely
to arise. Accordingly, wage earners employed in industries in
which the organisations of workers are weak have gained little
from the awards. It is also feared that progress in collective
bargaining may be retarded by the regular use of industrial
tribunals. Most workers in most Asian countries are employed
under individual agreements based on terms of employment
set by the employer. When such workers seek an increase in
wages, leave pay, overtime pay or allowances, they must
address themselves to their employer and, if their claims are
refused, refer the " dispute " to the industrial tribunal. Having
regard to the advantages that may accrue in the long run
from the development of effective machinery for collective
bargaining, it is therefore a matter of some importance that
consideration should be given to methods of offsetting any
unfavourable effects that the operation of industrial tribunals
may have on the process and development of collective bargaining.

CHAPTEB IV
PROBLEMS OF MINIMUM WAGE POLICY
In this and the next chapter some problems of wage policy
in Asian countries are further analysed. Broadly speaking,
these problems fall into two categories concerning respectively
the definition of wage policy in terms of the level and structure
of wages, and methods of implementation and enforcement.
In connection with the first category it has been pointed
out in Chapter I I that wage policy must be consistent with
accepted policies in other fields. This requirement may
strictly limit the possible choice of targets. For example the
rapid expansion of employment may be incompatible with a
programme calling for a rapid and considerable increase in
real wages for a substantial proportion of the employed labour
force.
The aims of wage policy can be achieved through statutory
wage regulation and, in certain conditions, conciliation and
arbitration procedures. The extent to which the latter can be
made effective instruments of wage policy depends on the one
hand on such questions as whether arbitration is compulsory
and binding or not, and on the other hand on the degree of
control exerted by the authorities responsible for formulating
wage policy over the bodies to whom the settlement of labour
disputes is entrusted. In countries where arbitration is widely
resorted to, any party to an industrial dispute may turn to the
arbitrator whenever he feels that the demands or offers put
forward by the other party are " unreasonable " or " unfair ".
Indeed, in extreme cases parties may scarcely attempt to
reach a voluntary agreement at all, preferring to refer the
question of wage determination to the arbitrator as soon as
the existing agreement or award expires. I n such circumstances it may be found necessary to define generally applicable
criteria of " fairness " or " reason ", and the government may,
through the persuasive influence of public pronouncements on
these questions or through formal prescriptions, seek to guide

PROBLEMS OF MINIMUM WAGE POLICY

75

the process of wage determination by the tribunals. In this
way it may succeed in introducing into this process certain
principles of general economic expediency, such as the need to
avoid inflation or to safeguard the balance of payments. In
other cases arbitrators may themselves take account of
considerations of this nature, though possibly in a more or
less unsystematic and unco-ordinated fashion. 1
A somewhat similar situation exists with regard to the
fixing of statutory minimum wages. As was observed in
Chapter III, while the various laws and decrees establishing
machinery for the fixing of minimum wages usually mention
certain criteria to be applied in wage determination—criteria
reflecting broad concepts of fairness and reason—they do not
generally provide the wage fixing bodies with much guidance
on how these criteria should be applied in practice. If the
existing legislation were fully applied it could have a considerable effect on the general economic and social situation in
most Asian countries ; it would therefore be highly desirable
if certain principles could be developed for the implementation
of this legislation. The discussion which follows is designed to
serve as a starting-point for the formulation of such general
principles. It is limited to problems of minimum wage policy
in the first instance because the fixing of minimum wages is
clearly the most popular objective of wage policy in Asian
countries. Part of the analysis could, however, also apply to
questions of wage policy in a more general sense.
The first problem of minimum wage policy is whether it
should aim at the establishment of a nationally uniform
minimum wage or whether a more differentiated system of
minimum wages should be established to take account of
differences in prosperity in different industries and areas, and
of other circumstances.
Whichever course is followed, the actual level (or levels)
of the minimum wage must be fixed on the basis of a simultaneous consideration of both the workers' recognised needs
for maintaining a certain standard of living and the economic
possibility of ensuring them such living standards through minimum wage regulation. As the Philippine Minimum Wages
Law of 1951 puts it, " a minimum wage to be established
under this Act shall be as nearly adequate as is economically
Cf. Industrial Awards in India, op. oit.

6

76

WAGE POLICY IN ASIAN COUNTRIES

feasible to maintain the minimum standard of living necessary
for the health, efficiency and general well-being of employees ".
How these two criteria of social desirability and economic
feasibility shall be combined and applied in determining the
level of the minimum wage is a second basic problem of
minimum wage policy.
The third question to be taken up in this chapter concerns
the establishment of appropriate machinery for the determination and enforcement of the minimum wage. The problem of
enforcement is especially difficult at the present stage of
development. As was noted earlier in this report, the bulk
of Asian wage earners are employed in agriculture, in the
handicraft and cottage industries and in domestic service.
These are precisely the industries in which, in countries with
limited administrative resources, it is most difficult to introduce
and enforce wage or other regulations.

T H E QUESTION OF UNIFORMITY

Uniformity among Industries
The scope of any particular minimum wage regulation may
be wide or narrow. One extreme possibility is to issue a
single general regulation fixing a uniform minimum rate of
remuneration for the whole country covering all workers in
all industries. In practice, however, even the most general
regulation provides for more than one minimum wage so as to
allow, for example, for inter-regional differences in the cost
of living ; or in order to establish or maintain certain wage
differentials between workers of different age or sex ; or in
order to establish a higher level of minimum earnings for
workers on piecework as compared with those paid according
to time. At the other extreme it is possible to have separate
regulations specifying minimum wages for every single industry
and for every economically distinguishable region. The
system adopted in the Philippines, for example, is more or
less of the first type. In most Asian countries, however, the
systems adopted tend towards the second type, regulations on
an industry or regional basis or both being issued as circumstances require or permit. Even then the question arises whether
such a gradually expanding system of minimum wage regula-

PROBLEMS OF MINIMUM WAGE POLICY

77

tions of limited scope should aim at the eventual establishment
of a fairly uniform level of minimum real wages for the country
as a whole or whether the level of the minimum wage should
be permanently linked to the particular conditions prevailing
in each industry or region.
The choice between a uniform and a more diversified
wage level will depend in part on the general purpose of the
minimum wage policy. If that purpose is to ensure to every
worker a certain minimum standard of living, the uniform
basic or minimum wage will be preferred. If, however, the
purpose is to ensure that every worker or group of workers
shall receive a reasonable share (however that concept may be
defined) of the revenue of the particular firm or industry in
which he is employed, a more diversified minimum wage system
will be more appropriate. The latter approach has been
recommended, for example, in discussions in India concerning
the " fair wage ", in the sense of a wage that would at least
be equal to the minimum wage, but should be higher if
circumstances in particular industries permit. 1 In practice
minimum wages have sometimes been deliberately differentiated so as to take account of differences in the state of
prosperity of different industries, in addition to the standard
of living.
It would seem, however, that in Asian countries the basic
purpose of minimum wage regulation is generally the establishment of a uniform " wage floor " to ensure that all those
employed for wages shall receive an income sufficient to
maintain the standard of living considered to be the socially
acceptable minimum. Under this conception those who would
benefit first and most from minimum wage regulation would
be the lowest-paid workers. Especially in Asian countries,
where the resources available for a more general rise in
standards of living will be small for a number of years to
come, the giving of such priority to the worst cases of poverty
would yield an important social gain.
1
See, for example, the views of the Indian National Trades Union
Congress and of the Government of Bombay, quoted in the Report of the
Committee on Fair Wages (Simla, Government of India, Ministry of Labour,
1949), paragraphs 12 ft.
It may be noted that uniformity and diversity are not mutually exclusive : the determination of " fair wages " might consist of the fixing of a
more or less uniform minimum wage supplemented by allowances varying
with the state of prosperity in different industries.

78

"WAGE POLICY IN ASIAN COUNTRIES

Apart from this consideration there are further arguments
that support the adoption of a more or less uniform minimum
rate of pay. First, a uniform minimum wage might help to
reduce the unnecessarily wide wage differentials that exist in
a number of Asian countries and that have been reported to
be a cause of wasteful labour turnover and of labour disputes.
Secondly, if a diversified minimum wage system were adopted
and the most productive and progressive industries were
obliged to pay the highest minimum wage on the ground that
their capacity to pay is higher than that of less productive
industries, the result would be that efficiency and high productivity would be taxed and inefficiency and low productivity
subsidised. Although this happens, in a sense and to some
extent, under most systems of profits taxation, and although
the result is not necessarily " unfair ", the imposition of
higher wage costs on more prosperous industries might hamper
the expansion of production and employment in them, while
at the same time hindering the contraction of production and
employment in less prosperous and less productive industries. Furthermore, the need for minimum wage fixing may
be relatively small in more prosperous industries, since these
industries may in any case be inclined to pay higher wages
in order to attract and keep the pick of the workers, or
because collective bargaining may develop more easily in
prosperous and expanding industries than in backward or
stagnant ones.
Finally, the machinery required for the fixing, periodic
revision and enforcement of one or a small number of minimum
wage rates will be simpler and smaller than that required for
a complicated system of prescriptions specifying different rates
for a large number of separate industries.
Hence a more or less uniform minimum wage, if it could
be applied, would appear to have certain important advantages
over a more complicated pattern of wage regulation. On the
other hand, such a uniform minimum wage rate would probably
have to be very low indeed, in view of the large variation in
capacity to pay in different firms, industries and regions. I t
has been observed in Chapter I that substantial differences
exist, at least in those countries for which some information is
available, between wages paid in indigenous agriculture, the
plantation industry, the handicraft and village industries and
modern manufacturing. A large part of these differences prob-

PROBLEMS OF MINIMUM WAGE POLICY

79

ably reflects nothing but the capacity to pay of these broad
industrial groups. This problem will be taken up in more
detail below, but it is clear that, if a general minimum wage is
to be established, the existence of a wide variation in capacity
to pay poses a dilemma. Either the minimum must be set at
such a low level that even the least productive section of the
economy can afford to pay it (in which case very few workers
could be made to benefit) or the problem must be faced that
either employment will have to be reduced in some industries
or they will have to be helped, in one way or another, to pay
the minimum wage fixed.
It is not likely that a workable solution to this problem
can be found in any near future. Many, perhaps all, of the
countries concerned will for a long time find it nearly impossible to establish a general minimum wage rate to be applied
in all industries. This does not mean that the objective of
ensuring about the same minimum standard of living to all
workers would have to be abandoned ; but the attainment of
that objective would become the terminal rather than the starting point of a rather long and gradual programme of general
social and economic development. Under such a programme
the establishment of a general minimum standard of living for
all wage earners would rank as one of the objectives, for the
attainment of which it would be a function of economic
policy to create the necessary conditions.
During the initial stages of programmes for protective
minimum wage regulation in Asian countries, it might perhaps
be preferable to establish different minimum rates of remuneration for various sectors of the economy. This would imply
the continued acceptance of lower minimum living standards
for wage earners in, say, agriculture and the cottage industries
than for those employed in more modern small-scale or largescale industries or on plantations ; there might even be differences within these broad categories—for example between tea
and sugar plantations or between jute and steel mills. At the
same time the levelling-up of these various minimum wage
rates towards a national, general minimum wage might be
maintained as the eventual objective of policy but made
dependent on the progress of economic development and on the
structural adjustments in the pattern of production and
employment which this would entail. There is, in fact, a case
for expecting that economic development will more or less

80

WAGE POLICY IN ASIAN COUNTRIES

automatically create the necessary conditions for substantial
uniformity in minimum wage rates. 1
Uniformity among Various Categories of Wage Earners
Men and Women Workers.
The essential purpose of minimum wage regulation (i.e. to
ensure a socially acceptable minimum standard of living to all
workers) implies that, in principle, the same minimum wage
should eventually apply to all industries. I t does not necessarily imply that the same minimum wage should be fixed for
all categories of wage earners within these industries. For
instance, the fact that the family responsibilities of various
groups of workers are different may be considered a reason
for corresponding differences in minimum wages. I t has been
argued, for example, that minimum wages might for that
reason be set lower for female workers than for males and in
India some awards by industrial tribunals have indeed provided for wage differentials based on sex. 2 The Committee on
Fair Wages already referred to notes, however, that there has
been an increasing tendency on the part of industrial tribunals
and courts to uphold, in their awards, the principle of equal
pay for work of equal value. The Committee itself appears to
favour general application of this principle, though they are
willing to accept lower minimum wages for female workers in
those cases where " women are employed on work exclusively
done by them " since " it can then no longer be said that the
wage earned by a woman is lower than that earned by a man
for the same or similar work ". 3
The preamble to the Constitution of the International
Labour Organisation specifically mentions recognition of the
principle of equal remuneration for work of equal value as
one of the means by which labour conditions can be improved
and the Equal Eemuneration Convention, 1951 (Article 2),
1
A basic principle of efficient allocation of resources is that the marginal productivity of labour, land and capital should be made equal for
their alternative uses. To the extent that programmes for economie development conform with this principle the marginal productivity of labour would
become more or less equal in all industries and all regions of the country.
This in turn would mean that about equal wages could be paid in all industries
and regions.
2
Industrial Awards in India, op. cit., pp. 26-27.
3
Beport of the Committee on Fair Wages, op. cit., pp. 21-23.

PROBLEMS OF MINIMUM WAGE POLICY

81

singles out " legally established or recognised machinery for
wage determination " as one of the means by which this
principle may be applied. This suggests that the possibility
of attaining equality of remuneration through the operation
of minimum wage regulation might be adopted as one of the
guiding principles for the application of such regulation.
I t is, however, generally conceded that progress toward
the goal of equal remuneration for work of equal value should
be gradual. One of the basic purposes of minimum wage
policy is to improve the living standards of the worst-paid
workers. Where the wages commonly paid to men and to
women differ substantially, immediate and full application of
the principle of equal pay might make it more difficult to
attain this basic purpose. The goals of improving the living
standards of the worst-paid workers and of equal pay for work
of equal value are, to a certain extent, competitive : the
increase in wage costs which would follow the application of
the equal pay principle would reduce the employers' capacity
to pay higher wages to male workers. Another factor to be
considered is the effect of abolishing wage differentials based
on sex on the relative employment opportunities for men and
women. I t may be that the demand for female workers would
fall and that the supply of female labour would increase. The
net result might be either a rise or a fall in female employment.
This may be either desirable or undesirable according to
circumstances. It might, for example, be considered desirable
to have fewer women employed in order to leave more employment opportunities for male heads of families, a situation
presenting certain advantages from the point of view of
raising the living standards of some of the poorest families.
But in other cases or from other points of view a reduction in
employment opportunities for women may be considered
undesirable.
Again it would seem that the principle of equal remuneration for work of equal value might be expressly recognised as
one of the objectives of minimum wage regulation, and the
gradual equalisation of wages for male and female workers,
where they are still different, made dependent on the progress
of economic development. This progress would eventually
make it possible to attain both the objective of adequate
minimum living standards for all workers and that of equal
remuneration.

82

WAGE POLICY IN ASIAN COUNTRIES

Different Occupations and Levels of Skill.
Wage differentials based on the worker's skill, his responsibility, the disagreeableness of the job, and similar considerations are fixed by wage regulating authorities in various
countries (e.g. Australia). In a number of Latin American
countries the " kind of job and its conditions " must be taken
into account by such authorities. The Indian Fair Wages
Committee recommended that wage differentials be established
on the basis of the following considerations : the degree of
skill, the strain of work, the experience involved, the training
required, the responsibility undertaken, the mental and
physical requirements, the disagreeableness of the task, the
hazard attendant on the work, and the fatigue involved. 1
This recommendation, however, concerns the establishment
of fair wages, which the Committee apparently considered
something more advanced than minimum wages.
According to the Indian Planning Commission " differentials for various jobs should be maintained at the minimum
levels justified by " the criteria mentioned above, which had
been suggested earlier by the Fair Wages Committee. 2 I t
would appear therefore to be the view of the Planning Commission that the minimum wage regulation should provide
for such differentials.
The problem of establishing a rational wage structure is
an important one in most Asian countries, not only because
the present pattern of wage differentials between various
industries and occupations is often rather unsystematic but
also in view of the setting up, under programmes of economic
development, of entirely new industries, for which entirely
new vocational nomenclatures and wage scales have to be
established. Whether minimum wage fixing machinery is the
most appropriate means of tackling this problem is another
question. When wages are fixed by an arbitration court in
order to settle a wage dispute the arbitrator will, of course,
usually fix the wage differentials for various occupations or
functions at the same time, if these are also the subject of
litigation. In Australia, for example, where many of the
decisions usually taken in other countries in the course of
1
2

Tief ort of the Committee on Fair Wages, op. cit., p. 20.
The First Five Tear Plan, op. cit., p. 584.

PROBLEMS OF MINIMUM WAGE POLICY

83

ordinary collective bargaining procedure are taken by conciliation commissioners associated with the Arbitration Court,
the awarding of differentials based on skill is a natural corollary
of the system of wage determination.
Normally, however, differentials based on occupation
and skills will result from the operation of market forces
reflecting the relative supply of and demand for various skills
and other special qualifications. As observed in Chapters I and
II, such forces have probably been responsible in part for the
existing substantial wage differential between rural and urban
wages and for the existence of larger differentials based on
skills in underdeveloped countries than in industrialised
areas. In certain cases market forces may result in unacceptably low wages in particular occupations and there may be a
need for statutory minimum wages. But in Asian countries
the problems of minimum wage regulation proper, which are
formidable enough in themselves, would probably become very
unwieldy indeed if complicated by job evaluation and wage
standardisation designed to establish wage differentials based
on criteria such as those mentioned above. The carrying
through of minimum wage regulations would certainly be
seriously delayed and, unless the problem of wage differentials
is considered at least as urgent as that of improving the living
conditions of the poorest workers, this would in itself justify
postponing action with regard to differentials or shifting it
to some other branch of wage policy administration.
There are, however, a few special categories of workers for
whom the fixing of special minimum wage rates might nevertheless be considered. First, workers performing exceptionally heavy or unhealthy duties might be granted somewhat
higher minima on the ground that their dietetic or other
normal needs are greater than those of the average worker.
Secondly, special provision might be made for workers whose
performance, because of physical or mental deficiencies, is
below normal. Thirdly, it has sometimes been suggested that
higher minimum rates might be fixed for piece-workers, on
the ground that they usually work at greater intensity than
time-workers. For example it might be decided that the
system of payment should be such as to make the average
worker paid by results earn 10 or 20 per cent, more, under
normal conditions, than the average worker paid by the hour
or by the day.

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T H E LEVEL OE THE MINIMUM WAGE

Generally speaking, the problem of selecting the appropriate level for the minimum wage consists in striking a
balance between the workers' recognised needs for maintaining a certain minimum living standard and the economic
and social feasibility of ensuring them such a standard of
living. Both concepts are highly elusive and their practical
application raises difficult problems of analysis and policy.
Speaking of the parts that the improvement in the standard
of living and the conditions of the economy have to play in
the fixing of minimum wages, the Bombay Industrial Court
found that " it is not possible to lay down, in any well-defined
terms, a basis for the fixation of the minimum w a g e . . . . I t
is not possible to define... in a precise manner either of these
concepts or to indicate the weight that should be attached to
each." 1 The difficulty is that neither of the two criteria in
itself suffices to determine the proper level of the wage : they
must be taken into account together. There would be little
sense in simply drawing up a household budget satisfying a
number of nutritional, medical, hygienic and cultural standards, and decreeing that the minimum wage should correspond
to the total cost of that budget, without considering whether
the economy would be in a position to supply the goods and
services postulated. On the other hand, the capacity to pay
wages is not a uniquely determined quantity either. For
example, among the criteria suggested for assessing this
capacity have been " fair profits " or " a fair remuneration to
capital and management " ; both are rather elastic concepts,
since the " fairness " of the remuneration going to management
and capital will usually be judged, among other things, in the
light of the prevailing wages. Furthermore, a level of wages
that may not be tolerable in a certain industry at the current
selling prices of its output might come within its capacity to
pay if these prices were raised.
It is thus seen that the problem of minimum wage regulation, conceived as a large-scale programme designed to affect
a large proportion of the wage-earning population, is related
to questions of consumption (and therefore also of savings and
1

Industrial Awards in India, op. cit., pp. 19-20.

PROBLEMS OF MINIMUM WAGE POLICY

85

investment), price policy, and the general approach to the
question of the distribution of the national income. Most of
these matters are of major importance to the problem of
economic development.
The above considerations concern the broad principles
governing the determination of the general level of the minimum wage. It has been pointed out in a previous section that
in practice, at least during the period immediately ahead, it
will probably be found impossible to establish a nation-wide
minimum wage rate for all industries. Therefore, if a set of
general principles of minimum wage policy is established, such
principles will serve only as a guide to the agency responsible
for fixing mimmum wage rates for a particular industry in a
given region. In the actual fixing of minimum wage rates the
principles established will, of course, have to be supplemented by
careful consideration of the particular circumstances of each
case. This means that the bodies in charge of the actual fixing
of rates will again be faced with the problem of comparing and
reconciling the workers' needs with the economic feasibility
of satisfying them in the industrial section concerned, even
though their freedom to assess, interpret and weigh facts and
circumstances may be limited by general directives emanating
from a central agency responsible for minimum wage policy
in general.
The Workers' Normal Needs
The determination of the workers' normal needs, which
minimum wage regulations aim to satisfy, consists essentially
in drawing up a household budget, taking account of certain
nutritional, medical and other relevant standards, and computing its cost. The list of items included in the budget may
be short or long according to whether it is to represent, say,
a minimum subsistence level or a minimum level of health and
frugal comfort.
As indicated above, the length of the final list, and hence
the minimum wage finally decided upon, cannot be determined
arbitrarily but must be the result of a careful analysis and comparison of the workers' needs and some standard of the country's or industry's capacity to pay.
One of the most decisive elements of these family budgets
is, of course, the size of the standard family for whom they

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WAGE POLICY IN ASIAN COUNTRIES

are drawn up. 1 In determining this size the guiding principle
will ordinarily be that the largest possible number of the most
urgent family needs must be met by the minimum wage.
Attempts have therefore been made to improve on the simple
statistical average of family size, for instance by taking into
account the following factors :
(a) the relative frequency of various sizes of family in a
region, among low-income families dependent on wage income ;
(b) the numbers of wage earners in families of various
sizes ;
(c) the age structure of families of various sizes, to be
taken as the basis for determining, on the one hand, the
number of " consumption units " per family and, on the other,
the number of what might be called " wage-earning units ",
children and women being taken, in both cases, at some lower
value than adult males.
On the basis of these and similar considerations some
appropriately weighted average of family sizes might be decided
to be the standard family. But whether a simple or a more
complicated average is used, the standard family will suffer
from its being an average, adequately representative at best
for a majority of the actual families concerned, but never for
all. There will always be families with more children or fewer
wage earners than was assumed for the standard family ; and
in other cases provision will be made for non-existent wives
and children. It might therefore be asked whether the worker's
minimum wage income could not be made directly dependent
on the size of his family. It would, of course, be difficult to
fix different minimum wage rates for workers with different
family responsibilities, since that would unduly hamper the
heads of large families in finding employment. This difficulty
does not arise where family allowances are paid out of the compulsory contributions made by all employers or all taxpayers
to a general fund. The standard family for purposes of wage
determination could then be very small ; moreover, a system
of family allowances might also be applied to self-employed
persons, thereby making a first contribution to the solution
1
Cf. Beport of the Committee on Fair Wages, op. cit., pp. 17-18 ; and
Industrial Awards in India, op. cit., pp. 24-26.

PROBLEMS OP MINIMUM WAGE POLICY

87

of the problem of income in this category. Some countries
have in fact tried to moderate the effect of different family
sizes on the determination of wage earners' needs by establishing extensive systems of children's allowances. This is not,
however, a universally accepted solution. In any case administrative and financial difficulties are likely to make it difficult
for Asian countries to adopt such schemes for some time to
come.
The Capacity to Pay Minimum

Wages

Perhaps the only clear and unambiguous property of
capacity to pay is that it, too, is not an absolute concept.
Eeference has already been made to such relative criteria as
the maintenance of " fair profits " and to the possibility that
an industry's capacity to pay higher wages may be enlarged
by raising its selling prices. Another consideration affecting
general decisions regarding the level of the minimum wage
will be the need for savings and investment within the framework of a general programme for economic development. The
larger these needs, the less rapidly consumption can be permitted to rise. But this would have to be a flexible standard :
there are various different possible levels of consumption and
savings from which a choice must be made. Again, while a
given increase in wages might be beyond the industry's capacity to pay at the existing level of productivity and efficiency,
it might be borne if productivity were raised.
The simple statement that a certain minimum wage would
be beyond industry's capacity to pay has little meaning. Any
judgment concerning capacity to pay must necessarily be
based on some explicit or implicit set of standards pertaining
to (a) the anticipated effects of the introduction of a given
minimum wage rate on prices, profits, employment, etc., and
(b) the evaluation of these effects in terms of social and economic policy. For example, in one case it might be found that
a given increase in wages would lead to a rise in wage earners'
consumption inconsistent with the level of savings required
for the economic development programme, and hence that the
proposed increase would be beyond the country's capacity to
pay. In another case it might be found that, while a given
increase in wages would raise the costs of a particular industry
to such an extent that production would have to be curtailed,

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WAGE POLICY IN ASIAN COUNTRIES

it would be possible to shift the workers thereby becoming
redundant to other more productive industries, so that the
proposed wage increase would be economically feasible.
It thus appears that, in the final analysis, the problem of
determining capacity to pay consists in deciding what weight
can be attached to the social objective of raising the living
standards of the worst-paid workers in the light of other
objectives of economic and social policy, notably the level of
employment and the rate of economic development.
By way of illustration some of the references to the problem
of wage regulation appearing in the first Indian Five-Year
Plan may be quoted here. This plan does not contain, nor
does it set out to give, any clear-cut programme of minimum
wage regulation. Nevertheless, it advances a number of general
propositions reflecting the broad approach to problems of
wage regulation, adopted by the authors of the plan, against
the background of their awareness and appreciation of the
relationship between wages and economic development.
The Planning Commission first observes, regarding workers'
living standards, that " the rate of progress has to be determined not only by the needs of the workers but also by the
limitation of the country's resources ". 1 It then proceeds to
an exposition of its broad views concerning the consequences
of a general wage increase and their impact on problems of
economic development. " Too rapid changes or changes on a
wide scale may result in financial, administrative and other
difficulties which endanger new reforms and retard further
development." Moreover, any rise in wages, which would be
reflected in higher prices, would at this juncture jeopardise
economic stability : the gains of the workers would in such
cases, the Commission believes, soon prove illusory, and in the
long run employment might be adversely affected. Nevertheless, the Commission felt that " full and effective implementation of the minimum wage legislation " should be assured
during the period covered by the Five-Year Plan.
The Commission found that certain broad principles which
might help in the regulation of wages had already emerged
from the work of various Indian commissions and committees.
These principles had, for the most part, been embodied in
1
The First Five Tear Plan, op. cit., pp. 571 ff. The following quotations
and other references have been taken from the same passage.

PROBLEMS OF MINIMUM WAGE POLICY

89

existing and proposed legislation, but they did not, according
to the Commission, form an adequate practical basis for a
uniform policy in determining wage rates and effecting wage
adjustments. I t is therefore recommended in the plan that a
tripartite machinery " should evolve in as precise terms as
practicable, the ' norms ' and standards, which should guide
wage boards or tribunals in settling questions relating to
wages, having regard to the claims of the various groups of
workers inter se, of the other participants in industry and of
the community as a whole ".
The Commission itself also formulated a number of guiding
principles regarding wage policy. In the implementation of
the minimum wage legislation, " depressed areas " should
receive prior attention. Moreover, all wage adjustments should
conform to the broad principles of social policy, and disparities
of income should be reduced to the utmost extent. The process
of standardisation of wages should be accelerated and extended
to as large a field as possible : there should be a progressive
narrowing down of disparities in the wage rates of different
classes of workers in the same unit, in similar occupations in
different units of the same industry, in comparable occupations in different industries, and in the same industry at
different centres. 1 Finally, it is recommended that wage
increases should be granted to restore the pre-war real wage
as a first step towards the establishment of a living wage,
which would be reached through increased productivity resulting from rationalisation and the renewal or modernisation of
plant.
In short it will be seen that the Commission recommended
a rather cautious approach towards problems of wage regulation, since it was keenly aware of the competitive character
of an improvement in workers' living standards on the one
hand and the other objectives of the Five-Year Plan on the
other. It also pointed to the need for further specification
of the prmciples by which wage regulation was to be guided
and indicated which parts of the programme of wage regulation should receive first priority (depressed areas and anomalies
in the existing wage structure). Steps towards the restoration
of the pre-war real wage were also recommended.
1

See, however, the Commission's views on wage differentials on p . 82
above.

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WAGE POLICY IN ASIAN COUNTRIES

The Effects of Wage Increases
It has been suggested above that, in testing the economic
feasibility of plans for raising the living standards of the
lowest-paid workers, it is necessary to analyse the most probable effects of a rise in wages and then to judge whether or
not these anticipated effects are acceptable from a general
economic and social point of view. The most important of
these possible effects are, perhaps, a rise in productivity, an
increase in demand for consumers' goods, changes in employment, the effect on the balance of payments, and a reduction
in profits. The following analysis of some of these effects is
in general terms. Their actual importance depends, of course,
on the size of the wage increases that the minimum wage
programme is designed to bring about. A modest programme,
aiming at the improvement of living standards of small groups
of wage earners only, would in most respects cause little or
no incidental effects. When the objectives of the minimum
wage policy are more far-reaching the consequences analysed
below will also be more important.
Wage Regulation and Productivity.
The effect of wage regulation on productivity is discussed
first, not because this is likely to be the most important effect
but because the problem of capacity to pay in this case may
be rather simple. If an increase in wages led to a sufficiently
large and rapid increase in productivity, it would, as it were,
create its own capacity to pay.
There are two main ways in which an increase in wages
through minimum wage regulation may affect productivity.
First, a rise in wage costs may serve as an incentive to the
employer to organise production more efficiently ; secondly,
an improvement in the workers' living standards may raise
their personal efficiency as a result of better health, education
and increased incentive to work.
Consider first the possibility of increased wage costs serving
as an incentive to employers to organise production more
efficiently. That there is often great scope for raising productivity through better organisation is beyond doubt. It is
often found that firms paying the highest wages have the
highest productivity. I t does not, however, necessarily follow
that a general rise in wages will lead to a general increase in

PROBLEMS OF MINIMUM WAGE POLICY

91

productivity. Firms that pay higher wages than the average
are for the most part able to do so because they are more
efficiently managed than their competitors and because the
high wages they pay help them to attract and keep workers of
superior efficiency. These advantages would not accrue, as a
result of a general rise in wages brought about by minimum
wage regulation, to firms which had previously lagged behind
the leaders. Moreover, raising minimum wages would be an
incentive primarily to secure a more efficient use of unskilled
labour. But there is already a large surplus of unskilled labour,
and it is a more efficient use of scarce factors such as capital,
land and skilled labour that would be the most desirable form
of raising productivity in Asian countries. For this there
would be no direct incentive from higher minimum wages.
There might be some incentive to substitute labour-saving
equipment for unskilled labour. But, as has been noted earlier,
such a substitution will in general be wasteful, even though
as a result the average output per person employed in the
industry or industries concerned will rise. In the first place,
some workers may lose their employment ; secondly, less
capital will be available to create additional employment
opportunities.
Consider now the second way in which higher wages and
living standards may raise productivity. I t is generally agreed
that the worse the conditions under which a worker is living,
the lower his personal efficiency is likely to be. By inference,
an improvement in his standard of living might be expected
to lead to an increase in his efficiency. This does not mean,
of course, that any improvement in a worker's living standard
would result in, say, a proportional rise in his performances
nor, if it did, that total output would increase correspondingly.
In some cases, for example in the Indian engineering,
textile and coal-mining industries, workers enjoying better
diets have indeed been reported to be more productive than
those whose nutritional standards were lower. 1 In other cases
less convincing results have been reported and one author
goes so far as to say that in India a rise in productivity caused
by a rise in wages " is the very rare exception rather than the
rule ". 2 D. E. Gadgil, in a more refined analysis of the ques1
2

Radhakamal MUKERJEE : The Indian Working Class, op. cit., p. 274.
E. DA COSTA : Indian Industry Today and Tomorrow (Calcutta, 1947),

p. 53.

7

92

WAGE POLICY IN ASIAN COUNTRIES

tion 1, first draws attention to the argument that a rise in
wages might very well lead to a rather rapid increase in productivity if applied by an individual employer : if he pays
wage rates that are distinctly higher than those of his competitors it is implied that he will get the pick of the labour
supply. " If the complement of workers of an individual
employer is specially efficient, then his cost of production per
unit of output may even be less than that of his competitors
in spite of his paying higher rates of wages." The author is
more cautious, however, with regard to the effect on productivity if wages are raised for whole industries. He recognises
that a rather general rise in wages may lead to the elimination
of the least efficient workers (thus causing unemployment
among these workers) and thereby give rise to an increase in
average productivity. But he also believes that " changes in
the standard of living . . . take place slowly, and the effects
that they may have on efficiency can become apparent only
gradually ". Whether, to what extent and how rapidly an
increase in the workers' productivity may come about as a
result of an improvement in their living standards thus
appears again to be a question that would need careful analysis
in any case in which it is to be taken into account as a separate
factor affecting the assessment of the economic feasibility of
a minimum wage. It cannot be simply taken for granted that
a rise in wages will automatically increase capacity to pay
through a rise in the workers' efficiency.
To the extent that productivity does increase, however, a
number of the difficulties discussed below would not arise, or
would arise in a less acute form.
Increasing Demand for Consumers'1 Goods.
Generally speaking, a programme for minimum wage
regulation will result in increased demand for essential consumers' goods. Such an increase in demand may have a number
of different effects, such as an increase in domestic output of
these commodities, a rise in prices, and changes in the state of
the balance of payments. Among these, an increase in domestic
output would obviously be the most desirable effect ; it is,
however, not the most probable one. For example, a rise in
1
D. E. GrADGiL : Regulation of Wages and Other Problems of Industrial
Labour in India (Poona, Gokhale Institute of Politics and Economics, 1943),
pp. 32-33.

PROBLEMS OP MINIMUM WAGE POLICY

93

workers' purchasing power would presumably lead to a rise
in the demand for food. (In any case, minimum wage regulation would, in most countries, be designed to stimulate an
increase in the consumption of food by the worst-paid workers.)
The raising of food production, however, requires improvements in methods of agricultural production, land reform and
so on ; it cannot be expected that a mere rise in demand, even
if that meant a rise in prices, would automatically lead to
higher production. This consideration may be borne in mind
when it is suggested, as it sometimes is, that the low purchasing
power of wage earners in Asian countries is itself a cause of
low production and that an increase in wages, because it would
raise effective demand, would itself create the additional
goods that the higher wages would buy. Lack of effective
demand may sometimes be an important cause of low production and employment ; in Asian countries, however, lack of
resources (other than unskilled labour) with which to produce
additional goods may be a more important cause.
Perhaps an increase in demand for other commodities,
such as clothing and housing, might result in some increase
in domestic supply. But for these commodities, too, it is
likely that a more or less substantial rise in prices will occur.
A rise in prices has several aspects. With money incomes
remaining constant for those who do not directly benefit either
by minimum wage regulation or by higher prices, a rise in
prices means that the real incomes of those groups will fall.
For the low income groups (for example the self-employed in
handicrafts industries) this would probably mean a proportional fall in consumption. For the higher income groups it is
likely to entail a reduction in savings. To the authorities
responsible for the economy as a whole it would mean that an
improvement in the living standards of the wage earners
concerned is obtained through a deterioration in the consumption standards of other low income groups (including wage
earners not benefiting by the regulation) and, if the additional
demand is directed mainly at food, through a shift of income
in the higher income groups in favour of landlords. Finally,
the rise in prices may serve to stimulate the import of consumers' goods and to reduce the volume of exports. This would
lead to a weakening in the balance of payments unless the
terms of trade improved sufficiently.1
¡"See pp. 100 fi. below.

94

WAGE POLICY IN ASIAN COUNTRIES

Some of these possible effects of a rise in prices may not
be thought desirable. A reduction in the living standards of
self-employed persons with low incomes and of wage earners
who are not benefited by the minimum wage regulation would
probably be considered undesirable. For an increase in the
incomes of other groups, for example the landlords, there
would seem to be little justification. An increase in imports
of consumers' goods may also be undesirable if it means that
imports of goods that are essential for economic development
have to be correspondingly reduced.
It would probably be possible to counteract some of these
undesirable effects of price rises. The most direct and radical
way to solve the problem would be by the imposition of price
control. I t is very doubtful, however, whether this would be
an effective solution, if only because the problem of inspection
and enforcement required to make the minimum wage regulation effective would presumably be more than doubled. An
undesirable increase in imports of consumers' goods could be
avoided through import restrictions. I t may also be possible,
though administratively difficult, to tax away undesirable
increases in the incomes of landlords and other groups benefiting by the higher prices. The problem of maintaining the
standards of living of the self-employed and other low income
groups, however, looks far more difficult to solve. In the
absence of adequate data concerning the distribution of income
in Asian countries, it is difficult to say exactly how serious this
problem is. But it seems safe to say that as soon as the level
of income of wage earners, which it is the purpose of minimum
wage regulation to ensure, comes close to that of other large
groups it will become difficult to make further progress in
minimum wage regulation without a much more general rise
in living standards.
Wage Regulation and Employment.
If it is the purpose of a minimum wage regulation to fix
the minimum wage at about the average level already prevailing
in the industry concerned, no serious problems of unemployment are likely to arise. The undertakings where wages are
substantially below the average prevailing in the industry as
a whole may be working at less than the average level of
efficiency, or the employers may, for one reason or another,
have succeeded in making abnormally high profits by paying

PROBLEMS OF MINIMTJH WAGE POLICY

95

their workers substandard wages. In the latter case the
imposition of a higher wage through a minimum wage regulation is not likely to result in any appreciable unemployment.
When an abnormally low level of productivity is at the
root of exceptionally low wages, the effect of the introduction
of the minimum wage might be that a number of firms would
have to curtail production and employment. In principle,
this would mean that the other more efficient firms could
expand their production and employment. Thus, the unemployment arising out of the contraction of production in the
weaker firms would, after some lapse of time, be matched by
an increase in employment elsewhere. This unemployment,
which would not be likely to assume large proportions, would
mainly be of the so-called " frictional " type. It might even
be that, after production had been concentrated in a smaller
number of more efficient firms, costs and prices of the product
could be reduced and production and employment in these
firms further expanded.
This is not certain to happen, however. Employment in
the industry as a whole may become somewhat smaller than
before, even though the volume of production is maintained
or slightly increased, for the very reason that productivity
for the industry as a whole has been raised. ÎTor is it certain,
of course, that if employment in some firms expands the new
jobs will be taken by those workers who lost their jobs elsewhere in the same industry. Moreover, it cannot too easily be
assumed that a rise in wages, by driving the least efficient
firms out of the market, will automatically result in larger
output at lower costs in the more efficient firms. Evidently,
if some firms are able to support higher wage-costs, because
of greater efficiency, while others are not, the former must
presumably have been capable of undercutting their weaker
competitors and driving them out of the market before the
minimum wage regulation came into existence. Thus the
question arises why they did not do so. If the answer is that
they could not have expanded their output anyway, for
example because it would have been impossible for them to
acquire the necessary equipment, it may well be doubted
whether the elimination of the less efficient firms through the
wage regulation would really be of any advantage.
In spite of this limitation, however, it would seem that
the rather modest type of minimum wage regulation, which

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WAGE POLICY IN ASIAN COUNTRIES

would only result in the fixing of the minimum wage at the
average wage level prevailing in a particular industry, will
generally not have unacceptable repercussions on the employment situation.
The case where a uniform minimum wage is introduced
for a group of industries is, in some respects, similar to the
previous one. Again it is possible that in certain industries
the employers are in a stronger bargaining position than in
others, the wage level is below the average for the group as a
whole, and the employers are making more than average
profits. It is difficult to say whether, and if so to what extent,
this is the actual position in Asian countries, because no
adequate data are available.
I t is also possible that, although profits are not abnormally
high, the wage level in a particular industry is unduly low
because some employers, in an attempt to improve their
competitive strength, deliberately keep wages low and thereby
put pressure on all employers in that industry to pay wages
below the general average. In such a case it may be possible
for the industry as a whole to raise its selling prices without
any substantial reduction in sales, output and employment.
Indeed, it may be that several industries are in a position to
raise their prices so as to increase their capacity to pay wages.
But how far this may be true is again a question that would
have to bê considered in the light of the circumstances of each
particular case. Although it may be that no unemployment
would arise as a consequence of such price and wage increases,
some or all of the undesirable effects of higher prices mentioned
in the previous section might make themselves felt.
It is also possible, however, that a number of less efficient
firms will have to curtail production and employment, or even
to close down altogether. When the minimum wage is fixed
at the average level, not of one particular industry but of a
group of industries taken together, this problem may assume
serious proportions. First, if the minimum wage is fixed at a
level appreciably above the average paid in one or more of the
industries concerned, the number of dismissed workers will
be larger than if a separate minimum wage is fixed for each
industry at the average level hitherto paid in that industry.
It is even possible that whole industries will disappear.
Secondly, the problem of expanding production and employment in industries with a higher capacity to pay will presura-

PROBLEMS OF MINIMUM "WAGE POLICY

97

ably be far more difficult than that of shifting workers from an
inefficient firm to a more productive firm within the same
industry. In the latter case the global pattern of production
and employment does not show material changes. In the
former case, however, the economic structure of the country
is affected and it is questionable whether sufficient capital will
be available for the expansion of certain industries to such an
extent that the loss of production and income in the contracting
industries would be compensated.
Eegarding this problem of fundamental differences in
productivity and in the capacity to pay of different industries,
some authorities, including the Indian Committee on Fair
Wages, have taken the view that " an industry which is
incapable of paying the minimum wage has no right to exist ".x
It would seem that this approach needs some qualification at
least in the short run.
Fundamentally, the existence of substantial and more or
less chronic differences in capacity to pay reflects a misallocation of productive factors. It means that labour is partly
employed in rather highly productive occupations and partly
in substantially less productive occupations, and that total
output could, theoretically, be raised if at least some labour
were shifted from the latter to the former. The more perfectly
an economy is functioning, the nearer the actual pattern of
production and allocation of productive factors will come to
the best possible economic structure of the country. It might
therefore be expected that differences in the capacity of industries to pay wages would be smaller in economically advanced
countries than in underdeveloped countries. 2 The fact that
1

Report of the Committee on Fair Wages, op. cit., p. 16.
But until the 1930s some more advanced countries also found it
necessary to take account of substantial differences in capacity to pay of
agriculture and industry. For example, in Australia agricultural workers
were originally not covered by the Commonwealth Conciliation and Arbitration Act, though after some time awards were made for certain groups of
agricultural workers. In 1932 two Australian experts found that agricultural
wages had been lower than industrial wages " largely because of the increased productivity per industrial worker following the adoption of machinery
in the factories ". The authors also submitted that the Arbitration Court
would " have to tread very warily if approached to make an award " in
certain branches of agriculture. " Possibly it would be well advised to fix
a very low basic wage which agriculture could support, leaving a margin
within which the employer and employee could bargain." (D. B. COPLAND and
0. de E. FOENANDER : " Agricultural Wages in Australia ", in International
Labour Beview, Vol. XXV, No. 6, June 1932, pp. 784 and 786.) In New
2

(¡oolnote continued overleaf)

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WAGE POLICY IN ASIAN COUNTRIES

an exceptionally low capacity to pay wages points to a misallocation of resources is a basic justification for the view
already mentioned that industries which cannot support the
minimum wage rate have no right to exist. This means, for
example, that if a country, in the course of its economic development, is establishing new industries or expanding existing
ones, it should preferably select those which promise to be
productive and which, for that reason, can also be expected
to be able to pay a reasonable wage. The position is different,
however, if a country already has an economic structure in
which less and more productive industries, like hand-weaving
and weaving mills, co-exist. Here economic policy should
certainly aim at a gradual reorientation of the pattern of
production and employment designed to ensure that labour
and capital will eventually be employed in such proportions
and by such industries as will permit more or less uniform
rates of remuneration in all industries to be paid as wages for
work requiring comparable skill and effort (and as interest on
capital), not only because such uniform remuneration is, on
grounds of " fairness ", an aim in itself but also because a
more or less equal remuneration of productive factors in all
industries is the counterpart of an efficient allocation of
resources.
On the other hand, taking the short view there are special
considerations that must be borne in mind in deciding whether
any industry should be allowed to be driven out of existence
by the height of minimum wages. The disappearance of an
industry, as long as it produces anything at all, is in itself an
economic and social loss. If the workers and capital employed
in such an industry were easily transferable to other more
productive occupations and ones that would not be available
unless the old industry vanished, the loss would be more than
offset. If the process of transferring these resources took a
Zealand the Court of Arbitration refused for some 30 years to make awards
fixing the wages of farm workers (except in certain special cases). Its reasons
included the consideration that it was difficult to fix a flat minimum rate
when so many different types of workers were involved and, on one occasion,
the likelihood, according to the evidence submitted, that some three or
four thousand workers in one district alone would not bo able to earn the
wage paid to the ordinary competent farm-hand and would have to be
given permits to work for lower rates. Widespread regulation of wages in
agriculture was undertaken in New Zealand only when a system of guaranteed prices for farm products was introduced. (E. J. RICHES : " Agricultural
Planning and Farm Wages in New Zealand ", ibid., Vol. XXXV, No. 3,
Mar. 1937, pp. 293-328.)

PROBLEMS OF MINIMUM WAGE POLICY

99

very long time, during which they lay largely idle, it would
be more doubtful whether there would still be a net gain.
But if the new employment and production opportunities
would have arisen in any case, the disappearance of the old
industry would be a definite loss. It has already been suggested
above that programmes of economic development may be
expected to lead eventually to greater equalisation of the
capacity to pay wages in various industries, because economic
development may be expected to result in a more efficient
allocation of resources. It seems advisable, therefore, to let
minimum wage policy lead to a gradual levelling-up, as economic development proceeds, of minimum wage rates in
industries that at present show substantial differences in their
capacity to pay.
Minimum wage regulation may affect employment not
only through its repercussions on the volume of output in the
industries concerned but also because a rise in wage-costs may
lead to the adoption of labour-saving techniques, in particular
through the introduction of labour-saving machinery. Whether
and to what extent this will happen will again depend on the
circumstances of the particular case. As a rule the introduction
of new equipment in a certain industry will depend on technical possibilities and on the awareness of the employers of
such possibilities (such as the use of electric motors in smallscale industry), on the availability of the appropriate equip-'
ment, on the financial resources of the employers, on the
existence of credit facilities, and so on. For the economy as
a whole the question is also rather complicated. With a given
amount of domestic saving and a given amount of capital
available from abroad, the introduction of machinery in
one industry must, theoretically, entail a decrease or a slower
increase in the amount of capital employed in other industries,
particularly in those where wages are already high and do not
increase as a result of the minimum wage regulation. It might
therefore be argued that a substitution of capital for labour
in some industries would be accompanied by a substitution of
labour for capital in others. But this would not mean that the
total number of jobs would be unaffected.
Generally speaking the substitution of capital for labour
does not seem to be economically justified so long as large
reserves of unemployed and underemployed workers exist.
In these circumstances what is needed is the utihsation of the

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WAGE POLICY IN ASIAN COUNTRIES

available capital in such a way as to increase employment ;
and any substitution of capital for labour is, in principle,
wasteful.
Most of what has been said so far regarding the possible
effects of wage regulation on employment concerns the repercussions of a wage increase on costs of production. Another
question to be considered is whether the increase in the income
of wage earners as a group resulting from minimum wage
regulation would affect employment. At first sight this
increase in demand might be expected to stimulate production
and employment : this will not, however, necessarily be the
case. It has already been observed that, if the additional
demand from wage earners were directed to essential consumers'
goods the production of which can be increased little or not
at all, the result would be a rise in the price of these commodities without any appreciable increase in employment in the
industries producing them. The key to this problem would
therefore be to expand output in certain industries. Should
this not prove possible, there would be a real danger that the
shift in demand would lead to a fall in employment, since it
would not be matched by a corresponding shift in the pattern
of production and employment.
Moreover, any increase in the real income of wage earners,
or of particular groups of wage earners, which is not accompanied by an increase in national production must be at the
expense of the real incomes of other sections of the community,
who will have to cut down either their consumption or their
saving or both. If they curtail their consumption, this will
tend to offset the effects on production and employment of the
increased demand coming from the wage earners who have
benefited from minimum wage regulation ; if they curtail their
savings the rate of capital formation, and with it the rate of
expansion of employment opportunities in the future, may
suffer.
Wage Regulation and the Balance of Payments.
The possible effects of minimum wage regulation on the
balance of payments need to be carefully considered. First,
in so far as an increase in wages leads to increased demand for
essential consumers' goods, such as food and clothing, there
may be an increase in imports and a fall in exports of such
commodities. This might be termed the " income " effect of

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101

wage regulation. Secondly, there will also be a " price " effect
in response to any rise in domestic costs of production as a
result of minimum wage regulation. The rise in costs of production may have several effects : it may encourage a greater
inflow of imports in substitution for domestically produced
goods that have risen in price ; it may lead to a rise in prices
obtained for exports ; and it may lead to a reduction in the
volume of goods that can be sold for export.
I t is likely, therefore, that the terms of trade will tend to
improve, since export prices will tend to rise to some extent in
relation to import prices. But it is impossible to say in general
what will be the final effect on the balance of payments. The
relative rise in export prices will strengthen it ; the fall in volume
of exports and the rise in the volume of imports will weaken it.
In view of the importance of exports of primary products
in the economies of some Asian countries, it is useful to consider
the rather special position of some of these products in world
markets, and ask whether increased costs of production might
be offset by higher export prices.
The main export products of underdeveloped countries,
including those in Asia, have always been staple commodities,
such as rubber, cotton, sugar, tea and tin, for which a world
market exists. Competition in the markets for such homogeneous or nearly homogeneous commodities is almost perfect and
no individual producer can raise his price out of line with the
prices of his competitors without virtually losing his entire
share in the market. As a rule the price is given, the individual
producer has no effective control over it, and if his costs of
production are rising while the market price for the product
remains constant or falls he will sooner or later have to stop
production. In such circumstances plantations in Asian
countries have sometimes been abandoned.
But experience shows that total demand for most raw
materials depends only to a very small extent on the market
price. The main factor affecting the level and fluctuations of
demand for such commodities appears to be the volume of
production in industrialised countries, itself not dependent
to any large extent on the costs of raw materials. 1 Thus it is
possible that, if all producers of a given raw material were
working at higher costs, the price of this material would
1

As distinct from sharp and frequent fluctuations in these costs, which
are a difíerent matter altogether.

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WAGE POLICY IN ASIAN COUNTRIES

permanently remain at a higher level. To what extent the
volume of demand for the material in question would be
affected would depend mainly on the availability and price
of substitutes. I t is at least conceivable that demand would
be little affected. In such cases the question might be raised
whether the purposes of minimum wage regulation in the industry producing the raw material in question might not be
facilitated by simultaneous action in the various countries
concerned. If, for example, it were found that within certain
limits a rise in the price of tin had little effect on the volume of
demand and if all countries producing tin were to raise wages
in the industry simultaneously and in the same proportion,
the burden of the higher labour costs might be almost fully
shifted to the more prosperous, industrialised countries.
Indeed, the Secretariat of the Economic Commission for Latin
America has advanced the interesting thesis that one of the
main reasons why underdeveloped countries did not share to a
greater extent in the fruits of the vast world-wide increase in
productivity during the last century or so was precisely
because the level of wages remained persistently low in these
countries while it continually rose in the industrialised countries. In the latter, where labour was better organised and
succeeded in obtaining ever higher and higher wages, the higher
costs of production could be borne by keeping prices constant
in spite of increasing productivity or by raising prices. In the
underdeveloped countries, on the other hand, wages rose very
slowly, if at all, and prices remained below the level they
could have reached if wage costs had been rising faster. 1
A thorough discussion of this thesis would be beyond the scope
of this report. The first reaction of importers in industrialised
countries to rising costs and prices of the exports of some
underdeveloped countries might be to cut their purchases, to
switch their trade to other countries and to seek substitutes.
Production, employment and exports might fall to rather low
levels in the countries which had raised their wages costs.
After an interval, which might be fairly short especially if
other underdeveloped countries adopted similar wage policies,
production, employment and exports would tend to be restored
at better prices. But even a temporary drop in export proceeds
1
See United Nations : The Economic Development of Latin America
and Its Principal Problems (New York, 1950), and Economic Survey of
Latin America, 1949 (New York, 1951), Part I, passim.

PROBLEMS OF MINIMUM WAGE POLICY

103

might prove insupportable for countries which, like most
Asian countries, are continually in difficulties with their
balance of payments. It would, nevertheless, seem that the
possibility of raising living standards in these countries along
the lines indicated above deserves to be considered.
The total value of export proceeds may rise or fall as a
result of an increase in wages. Imports, on the other hand,
will almost certainly tend to increase. If there is an offsetting
increase in the value of export proceeds, no difficulty arises. It
is possible, however, that some countries will find themselves
in a position where they will have to take some action with
regard to restoring international balance if they are to go ahead
with minimum wage regulation. One possibility is to reduce
imports of capital equipment in order to make way for imports
of consumer goods, thus slackening the rate of economic
development in order to promote the immediate welfare of
lower-income groups. Another- possibility is to introduce or
extend measures designed to expand exports or reduce imports,
or both—for instance, export subsidies, quantitative restrictions on imports, import duties or exchange devaluation.
Which of these methods is chosen in order to offset the effects
of minimum wage regulation on the balance of payments will
depend on the views of the governments concerned on sections
of expenditure that should be reduced in order to make way
for increased consumption by wage earners.
One aspect of the relation between minimum wage regulation and the balance of payments remains to be considered.
This concerns the short-term problem arising from the fact
that fluctuating industrial activity in countries that are the
main purchasers of raw materials exported by underdeveloped
countries leads to sharp fluctuations in the prices of these
commodities.
Temporary slumps in demand may make it very difficult
for the industries producing such materials to continue operations if costs are rigid. Thus the question arises whether
minimum wage regulations should not be made sufficiently
flexible to meet this difficulty, which must be expected to occur
from time to time, especially so long as no effective measures
have been taken to stabilise the markets for raw materials. 1
1
For example, in 1949 when rubber prices were very low, minimum
wage regulation was temporarily suspended in the Ceylon rubber-growing
industry.

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WAGE POLICY IN ASIAN COUNTRIES

In view of the importance of these industries in the region,
probably none of the Asian countries could afford to endanger
the existence of industries producing raw materials for the
sake of maintaining their minimum wage regulations. On the
other hand, the industries themselves might be required to
make provision for some stabilisation of wages (and employment). If profits in these industries are low or disappear in
times of depression, they often rise to very high levels in years
of prosperity. It should be possible, therefore, to set aside some
reserves in prosperous years for use in times of adversity.
Measures of this kind are commonly taken to ensure stability of
dividends and it would seem reasonable enough to suggest
that some provision be made also for stabilising the income
of the industry's workers. If this could be done the ordinary
principles of minimum wage regulation could be applied,
subject perhaps to some measure of flexibility, to industries
that are more than usually liable to cyclical fluctuations.
Wage Regulation and Profits.
A rise in wages through minimum wage regulation does
not necessarily entail a fall in profits. The employer may
raise his selling prices or increase the efficiency of production
and thus maintain, perhaps even increase, his profits. Yet it
must be expected that, in at least some industries, profits that
were abnormally high before the minimum wage regulation
was introduced will be reduced. It is also quite possible that
wage regulation will cause aggregate profits to fall.
The current and prospective level of profits has often
played an important part in the assessment of a firm's or
industry's capacity to pay wages. Eeference has already been
made above to the concepts of " a fair return on capital and
remuneration to management ". Other criteria sometimes
suggested are that a firm or industry should be enabled to
make " a fair allocation to reserves and depreciation so as to
keep the industry in a healthy condition " or, at least, " to
maintain production with efficiency ". 1 It would seem that
from the point of view of the economic feasibility of a wage
increase, the two main considerations in judging the appropriateness of the level of profits are related to savings and to
the function of profits as an incentive to private enterprise.
1

Report of the Committee on Fair Wages, op. cit., p. 15.

PROBLEMS OF MINIMUM WAGE POLICY

105

Profits and the supply of savings. If higher wages are paid
out of profits, savings will probably fall. The additional wage
income must be expected to be fully consumed ; indeed, it
is generally the very objective of minimum wage regulation
to raise the wage earners' consumption by the full amount of
the wage increase. The reduction in profits, on the other hand,
is more likely to result in lower savings by the higher-income
groups than in a compensating reduction in consumption.
I t is generally agreed that the first need in underdeveloped
countries is for increasing savings. This may not, however,
be sufficient ground for rejecting minimum wage regulations,
which would result in the shift from savings to consumption
mentioned above.
In the first place, the incomes of large groups of the population are so low that the savings made by the rich are partly
consumed by the poor. This happens, for example, when the
latter sell their land or other property, or when they assume
heavy debts, sometimes involving the loss of part of their
personal freedom, for the bare maintenance of life. Such transactions, although involving saving and investment from the
private point of view, are nothing but an increase in the concentration of wealth from the national point of view. Socially, they
do not represent any net saving or investment at all.
There is also the point that available savings might, to
some extent, be invested in more productive ways. Various
observers agree that in some underdeveloped countries an
appreciable part of savings is wasted in, for example, investments in over-expensive public works or luxurious buildings
or is transferred abroad, while there is a general reluctance
on the part of the owners of capital to engage in more productive long-term investments involving risks of a nature different
from those they are accustomed to. 1 Where misallocation of
capital is widespread, the first need may be to divert savings
into more productive channels ; if this can be accomplished,
even some reduction in total savings may be found compatible
with an acceleration of economic progress.
It should be added that even when the need for saving and
investment is explicitly recognised as a factor to be taken
1
See, for example, United Nations : Measures for the Economic Development of Underdeveloped Countries (New York, 1951), pp. 54 ff., and Paul A.
BARAN : " Economic Progress : General Considerations—Discussion ",
in American Economic Beview, Vol. XLI, No. 2, May 1951, pp. 356 ff.

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WAGE POLICY IN ASIAN COUNTRIES

into account when wages are fixed, this does not mean that
every firm or industry must be able to finance its investment
out of its own means. Funds for investment may also be
borrowed. Provided, therefore, that the aggregate amount
of savings does not fall short of the amount required for
necessary investment, the wage fixed for a particular firm or
industry may be put at a level at which profits in that particular
firm or industry will not meet the needs for investment in it.
This question of the relation between wage increases and
savings is considered further in the next chapter.
Profits as an incentive.
It is generally recognised that
private enterprise has an important part to play in the industrial development of Asia. 1 Profits being an essential incentive
for private enterprise, the question may be raised whether
there is a " critical level " below which " normal " profits
cannot be permitted to fall if this incentive is to be preserved.
To attempt a full analysis of this question would be beyond
the scope of the present report. Two points may, however,
be mentioned.
First, it would appear that, generally speaking, because of
the scarcity of capital and of industrial enterprise and the
existence of special risks such as social and political instability
and the absence of a developed economic system to support
industrial ventures, rather high returns are at present required
to attract capital into long-term investment in Asian countries.
The provision of credit facilities and increased supplies of
capital, the improvement of communications and the establishment of auxiliary industries on a wide scale are essential
features of economic development. If that development is
successful and is accompanied by greater social and political
stability, it may be expected that the rate of profit required
to attract industrial enterprise will progressively fall and that
the capacity to pay wages will accordingly rise.
Secondly, many of the new types of enterprise required
to maintain economic development involve exceptionally
large and long-term risks and very large investments of
capital. They are likely by their nature to prove unattractive
1
See, for example, the resolution adopted by the preparatory Asian
Regional Conference (1947) concerning the economic policies necessary for
the attainment in Asia of the social objectives of the I.L.O., in Official
Bulletin, Vol. X X X , No. 3, 15 Nov. 1947, p . 168 ; and Measures for the
Economie Development of Underdeveloped Countries, op. cit., pp. 20-26.

PROBLEMS OF MINIMUM WAGE POLICY

107

to private enterprise and must be undertaken by governments,
which will not be subject to the special considerations regarding
the necessary rate of profit mentioned above and will therefore
be able to disburse larger wage-payments.

MACHINERY FOR MINIMUM WAGE EEGITLATION

The Fixing of Minimum

Wages

In the Philippines the minimum wage has been fixed by
law. In most countries, however, the law provides for minimum
wage fixing machinery and stipulates some general principles
of wage fixing, leaving to boards or tribunals the actual
fixing of minimum wage rates. 1
As was noted in Chapter I I I , several Asian countries have
adopted the principle of joint and equal participation of
employers and workers in the operation of minimum wage
regulation. This principle is in conformity with the Minimum
Wage-Fixing Machinery Convention, 1928, and with resolutions adopted by the Asian Eegional Conferences. It is also
of particular importance in view of the need to develop a
wider system of collective bargaining for which minimum wage
regulation could serve as a useful preparatory device by
encouraging the development of effective organisations.
An important question is whether the fixing of minimum
wages should be entrusted to trade boards or to more general
boards. Mr. Gadgil 2 , writing of India in 1939-40, preferred
trade boards on the ground that " there exists in this country
a very large element of diversity in every aspect of the industrial situation, with marked differences in conditions from
province to province and from industry to industry ". This
factor, he considered, was more important than the advantages
claimed for a general board, namely " that it enables the
application of a uniform set of principles to wage determination in all industries and enables the attainment of a comparatively uniform wage level in the entire economic system ".
1
The Philippines Minimum Wage Law also provides for further minimum wage fixing by industrial wage boards. As in certain other countries,
the minimum rates fixed by the law are in effect a minimum
minimorum.
2
Regulation of Wages and Other Problems of Industrial Labour in India,
op. cit., p. 52.

8

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WAGE POLICY IN ASIAN COUNTRIES

The United Provinces Labour Enquiry Committee, 1946-48 1,
attaching great importance to the principle of a uniform
minimum standard of living, proposed a provincial general
wage board which might appoint ad hoc industrial divisions
and would therefore show features of both types of wage
fixing machinery.
As has already been noted, the Indian Planning Commission
recommended in 1948 that a set of principles to be followed in
questions of wage policy should be established by tripartite
machinery. Indeed the Commission regarded the problem of
wage regulation as part of the general question of economic
development. In the present report the relationship between
wage policy and problems of general economic policy has also
been repeatedly stressed and if this relationship is accepted it
would seem necessary to provide for the formulation by some
central agency of certain general principles of wage regulation.
What would appear to be needed is a type of minimum
wage machinery that would include bodies competent to take
account both of this need and of the diversity of conditions in
different industries and regions. Decisions in the field of
minimum wage policy as a whole might be taken by a central
body, which would be in a position to relate this part of economic and social policy to other general problems. The
principles emerging from the findings of this body might be
applied to particular industries, groups of industries or regions
by special trade or regional boards responsible for fixing
minimum rates of wages in the light of the special circumstances prevailing in the industries or regions concerned.
These special boards might be given varying degrees of
autonomy. For example, they might be empowered to fix
minimum wage rates in the light of such general directives as
the central body saw fit to issue, or they might merely be
asked to propose minimum rates, the final decisions being left
to the central body. They might also be given some guidance
on what allowance they should make for the possible repercussions of wage regulation on employment and the chances of
re-employment of redundant workers. An infinite variety of
possible distributions of competence between general and more
specialised bodies would be possible and the selection of. the
most appropriate line of demarcation would obviously depend
1

First Eeport, op. cit.. Vol. I, Part I, pp. 306 tf.

PROBLEMS OF MINIMUM WAGE POLICY

109

on the particular circumstances in each country : the existence
or not of a well-defined programme of economic development,
the precise objectives of minimum wage policy, the scope of
the bodies concerned, and so on.
It might be found desirable, during the initial phases of
the minimum wage programme, to reserve comparatively large
powers to the central body and to assign to the representatives
of the government on that body a major degree of responsibility
and power. During these initial phases the programme of
minimum wage regulation would be largely experimental,
particularly if it covered such industries as agriculture, smallscale manufacturing and village industries, and the government might wish to keep this experiment under rather close
control. Moreover, it might prove difficult in the beginning
to find a sufficiently large number of competent labour and
other members to sit on trade boards. Finally, it is usually
easier to delegate further authority after a lapse of time than
to withdraw delegated powers which experience indicates
ought to have been reserved to a central body.
Machinery for Inspection and Enforcement
Difficulties of inspection and enforcement are perhaps the
greatest impediment to an extension of effective minimum
wage regulation in most underdeveloped countries. Considering
the tremendous size of some of these countries, the extremely
large number of small enterprises in which only one or a few
wage earners are employed, the complicated systems of payment in use in large areas where a money economy is only just
beginning to develop, and the limited number of qualified
persons available for inspection and enforcement, the difficulties may well seem almost insuperable. Problems of the
enforcement of labour measures have been discussed comprehensively in an earlier report of the International Labour
Office 1 , to which readers may be referred. In what follows a
few brief remarks only will be added to this earlier analysis.
The most effective approach to the problem of enforcing
minimum wage regulations in Asian countries may well be
through the education of the general public. The stronger
the conviction in a society that the Avorker deserves a reason1
Labour Policy in General Including the Enforcement of Labour Measures,
op. cit., Chapter VII.

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WAGE POLICY IN ASIAN COUNTRIES

able wage, the less a programme of minimum wage regulation
will depend on machinery for inspection and control. If farreaching social measures are taken against the will of a large
part of the population or if, as is more likely, people are
ignorant or feel indifferent about these measures, the amount
of inspection work required to make them effective will almost
certainly be beyond the capacity of the administrations of
Asian countries. Moreover, if the work of the inspector is to
be really effective, he should be looked upon not as a special
sort of policeman but rather as an instructor and advisor in
matters within his competence. 1 This requires not only
skill, tact and understanding on the part of the inspector but
also the recognition by the employers, the workers, and the
general public of the significance of his duties. If he is considered as an intruder, or if social barriers hamper normal
human contact between him and the employers or workers, the
inspector is likely to find his work extremely difficult and may
become totally ineffective. These difficulties will be enhanced
if his official rank is too low to give him the necessary authority
and social standing, if his salary is so low as to expose him to
the temptation to accept bribes, or if he is not consistently
supported by his superiors.
Indifference or hostility towards social legislation and the
problems involved in recruiting and training an adequate
number of competent inspectors cannot be fully overcome in a
few months or, for that matter, years. In the initial phases
of a comprehensive programme of minimum wage regulation
it may therefore be found essential to take measures designed
to reduce the amount of necessary inspection work to the barest
minimum. One principle that suggests itself in this connection
is that such minimum wage regulations as are promulgated
should be made as simple as possible. The smaller the number
of permissible exceptions to a few general rules, and the
simpler the procedures for reporting and dealing with infringements, the larger will be the number of cases that a given staff
of inspectors can handle. Of course, such simple regulations
may prove imperfect, or even inappropriate or unfair in
particular cases. To what extent such simplification should
be sought is again a question that can be answered only in
the light of the circumstances of each particular case.
1
See Labour Policy in General Including
Measures, op. cit., pp. 285 ff.

the Enforcement of Labour

PROBLEMS OP MINIMUM WAGE POLICY

111

Another question which might be considered in this
connection concerns the extent to which the work of inspection
might be entrusted, at least during the initial phases of the
programme, to persons who, though not belonging to the
inspection staff proper, have to maintain contact in some
official capacity with industries in which minimum wage
regulation is applied and whose normal duties are such that
they could, without much additional effort, check on the implementation of wage regulations. 1 While this procedure would
not be ideal, it might be worth adopting until such time as
the regular inspection staff can be built up to an adequate
strength. Eecourse might also be had to the assistance of
the trade unions in policing the application of wage decisions
—a method that has been followed with success in certain
industrially developed countries. Pinally, an adequate system
of sanctions in cases of deliberate infringement of minimum
wage regulations may, to some extent, reduce the amount of
inspection required. If such sanctions are mild—for example,
if only moderate fines can be imposed—non-observance of the
regulations involves only a minor risk : the more severe the
sanctions the less will employers be disposed to run the risk
of detection, even when inspection is infrequent.

1
Groups of officials who might he found appropriate for this purpose
would perhaps include persons in charge of the assessment of tax liabilities
and officials who are engaged in programmes for the development of certain
industries, such as cottage industries.

CHAPTER V

WAGE POLICY AND ECONOMIC DEVELOPMENT
Two main relationships between wage policy and economic
development were noted in Chapter I I above. One of the
principal aims of wage policy in Asian countries is to ensure
that the incomes of the workers will rise in step with the
increasing output of wealth as economic development proceeds.
Then, there is the problem of whether wage policy can help to
speed up economic development and in what way. These
two questions, together with the special problem of the adjustment of wages to changes in the cost of living, are briefly
discussed below.

T H E ADJUSTMENT OF THE LEVEL OF WAGES TO THE PROGRESS
OF ECONOMIC DEVELOPMENT

As already mentioned the Asian Advisory Committee
agreed in December 1950 that the immediate need in Asia was
for a minimum wage structure which would ensure a reasonable
living standard, from which should emerge, as the economy
developed, proper living standards, including a fair share for
labour through rising productivity. Similarly, as regards
agriculture the Asian Eegional Conference of 1950 had considered that " wage fixing machinery should be established in
order . . . to ensure that increases in productivity will be
reflected in the wage earnings ". 1
Adjustment of wages to progress in economic development
may take different forms. The level of wage rates may rise
in step with increases in national output while the volume of
employment remains more or less constant ; or the total sum
of wages paid may increase because the volume of employment
expands even though the level of wage rates remains more or
1

Industry and Labour, Vol. I l l , No. 7, 1 Apr. 1950, p . 251.

AVAGE POLICY AND ECONOMIC DEVELOPMENT

113

less constant. Various combinations of these two extreme
cases are, of course, also possible ; if a planned attempt is to
be made to influence the wage level, a choice has to be made
among these various possibilities. One important consideration affecting this choice would normally be its effect on general
economic development. I n Asian countries economic development is essentially a matter of finding ways and means of
increasing productive employment, and it is generally believed
that at present an increase in employment opportunities is
limited by lack of capital. This is probably correct, but in an
analysis of employment and capital shortage in Asian countries
the role of the wage level and changes therein should not be
overlooked : the extent of the shortage of capital itself may
be determined in part by the wage level.

UNEMPLOYMENT, CAPITAL SHORTAGE AND THE
WAGE LEVEL

The statement often made that a shortage of capital is
one of the main causes of unemployment in underdeveloped
countries needs to be interpreted with some care. What this
statement usually means is that, production and production
methods being what they are, there is not enough capital to
provide employment for all those seeking work at the prevailing
level of wages (including social charges and other elements of
labour cost).
Broadly speaking, the volume of capital required for
providing employment to a country's working population
depends on the types of commodities produced and on the
technical processes by which they are produced. In many
cases the nature of the goods to be produced is such as to leave
little scope for variation in the amount of capital used per unit
of value added or per worker employed. Thus capital requirements are relatively low, for example, in the production of
soap and candles and of ready-made clothing ; they are
higher for rubber goods and tyres, and very high in steel works
and rolling mills, synthetic textiles and the generation of
electricity. In many cases, however, the ratio of capital
technically required to value added or labour employed is not
rigidly fixed but can be varied within fairly wide limits : road
building, dam construction and textiles production are cases

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WAGE POLICY IN ASIAN COUNTRIES

in point ; more generally it may be said that in small-scale
units of production the ratio of capital (and energy) per unit
of labour and output is often smaller than in large-scale
manufacturing. 1
In countries with relatively abundant labour and meagre
capital resources it would seem clearly desirable to concentrate
on the production of commodities that have a high labour
content and, when there are possibilities of producing the same
or similar goods through more labour-intensive or less labourintensive processes, to concentrate on the former. Such a
policy will enable the amount of capital available to provide
employment for a larger proportion of the labour force than
could find employment if production were concentrated on
goods with a high capital content and if capital-intensive
production methods were applied.
Normally it might be expected that the market mechanism
would more or less automatically take care of the process
of selecting the commodities and production processes that
would ensure the highest possible degree of employment of
the labour force. If labour is abundant and capital is in
short supply labour might be expected to be so cheap and
capital so expensive that entrepreneurs would find it profitable to produce commodities with a high labour content
and, in doing so, to apply labour-intensive production processes.
However, in actual practice this often does not happen.
On the contrary, it has frequently been noticed that producers
using a high proportion of labour (such as small-scale producers)
find it extremely difficult to compete with the larger mills,
which apply more capital-intensive production methods, or
that countries with an abundant supply of labour import
commodities with a high labour content and produce for themselves goods with a high capital content. To some extent such
economic anomalies are the result of deliberate government
policies designed to provide the country with a minimum of
heavy industry. But in addition it is likely that, in Asian
countries, the market mechanism does not always operate to
bring about the selection of the goods and production processes
that, from a general economic point of view, would seem to
1
See, for example, Joseph STEINDL : Small and Big Business : Economic
Problems of the Size of Firms (Oxford, Basil Blackwell, 1945), pp. 16 and
22 ff.

WAGE POLICY AND ECONOMIC DEVELOPMENT

115

conform to the normal pattern of production for countries
with large unemployed labour resources.
One reason is probably that the prevailing level of industrial
wages does not fully reflect the abundance of labour in relation
to the volume of capital available but is determined to a much
greater extent by the level of income in agriculture. As was
noted in Chapter I, the occupational structure of the working
population in most Asian countries is such that (a) the great
majority of workers are engaged in agriculture, and (b) the
great majority of these workers are self-employed.
Selfemployed agricultural workers being the major source of wageearning industrial labour, there is bound to be a close relationship between the average incomes of farmers and the level of
wages in non-agricultural employment.
Workers will not normally move from the country to take
up employment in the town for any prolonged period if the
wage is worth less than the income they would earn in their
villages as small independent or semi-independent farmers or
simply as members of a farming family (although some may
be forced to take up short-term employment for a very low
wage if they are in urgent need of money). In order to attract
people to settle as industrial workers in an urban environment,
wages may in practice have to be somewhat higher than average
incomes in agriculture so as to offset the higher cost of living
and the absence of traditional forms of social security often
provided by the rural communities and to overcome workers'
resistance to the more disciplined methods of work in industrial
employment. 1
Generally a wage earner is hired only if his employment
yields an addition to the value of the firm's product that is at
least equal to the amount of his wage. This principle does not
apply in family farming. When there are no alternative
employment opportunities members of the family will stay on
the farm and share in the family's income even when the same
output could have been produced without their services, which,
when underemployment is as serious as it is in most Asian
countries, is the normal case. In such circumstances it is
possible that workers can remain " employed " in agriculture
while it would not pay an industrial employer to hire them at
1
These and similar factors may also explain the rather substantial
differences between wages in agriculture and industry noted in Chapter I.

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WAGE POLICY IN ASIAN COUNTRIES

a wage equal to—let alone higher than—the income which
they receive in family farming. This may be so even though
the value of their services in manufacturing would be greater
than the value of the decrease, if any, in agricultural output
that would result if they were transferred from agriculture to
manufacturing. Wherever the latter is the case it would
clearly have been advantageous to the economy if the workers
were indeed transferred from agriculture to manufacturing,
but this will not happen as long as the money value of their
work in manufacturing is lower than the money wage as determined by average incomes in agriculture and by the other
factors mentioned above. However low this wage may be,
it is often higher than might be expected in view of the abundance of labour—particularly unskilled labour.
One result is that in Asian countries it is difficult, because
of high labour costs, to establish competitive manufacturing
industries even though there is an abundant supply of labour.
A second result is that in such industries as do exist producers
find it profitable to invest in labour-saving equipment and to
produce capital-intensive goods, even though there is widespread unemployment. In other words more capital tends to
be invested per worker than would have been the case if wages
had reflected more accurately the very low scarcity value of
labour. The total employment-creating capacity of the capital
available is therefore relatively small and the capital shortage
more acute.
If economic development gets under way and more capital
becomes available, more labour could be employed at the
prevailing wage rate and labour would become somewhat less
abundant. However, if wage rates go up at the same rate as
capital formation, employers will find it profitable to introduce
more labour-saving equipment and to concentrate further on
the production of goods with a high capital content. Although
the total stock of capital is increasing, employment will
rise less quickly ; in extreme cases it may not rise at all
and the shortage of capital may remain as acute as it was
before.
As regards the relationship between wage policy and
economic development, this appears to mean that a choice
has to be made between a more rapid rise in the level of wages
on the one hand and a more rapid increase in the volume of
employment on the other. As a very broad generalisation it

WAGE POLICY AND ECONOMIC DEVELOPMENT

117

might be said that the more rapidly the wage rates paid to
those already employed are rising, the smaller are the opportunities for providing employment for additional workers. 1
WAGES, ECONOMIC DEVELOPMENT AND INFLATION

If wage policy is not to have inflationary effects, it will be
important to bear in mind that, in the course of economic
development, employment is likely to increase. Workers who
were either wholly or partly unemployed will find jobs, and
consequently their incomes will increase. This means that even
at stable wage rates the total wage bill of the developing
country and the demand for wage-goods will increase. If the
newly employed workers are producing consumption goods
this additional demand can probably be satisfied without
much difficulty ; it will be clear, however, that if the supply
of wage-goods is increased by a given percentage this will not,
in itself, make possible a proportional increase in average
earnings, since the larger volume of goods will have to be
distributed among a larger number of workers.
In practice, the situation will probably be more complicated.
Even if the emphasis in development planning is on a rapid
increase in the supply of essential consumers' goods, some
preliminary investment will usually be required. Such investment will give rise to additional employment and income, but
there will be no immediate increase in the supply of consumption goods on which the wages earned by the workers
employed on the investment projects can be spent. Such
commodities will become available in a future that will be
more or less remote according to whether the investment goods
produced are of the " slow " or " quick " type ; and at that
future date wages should be sufficiently high to enable the
workers to take the increased supply off the market. But in
the initial phases of economic development some caution
should be observed with regard to the wage level so as to
1
It is indeed doubtful whether the general level of wage rates could
easily be made to increase much faster than, for example, average agricultural incomes. If the difference between agricultural incomes and industrial
wages became very large, more workers would be attracted to industry and
competition for jobs would become keener. As a result wage rates would
tend to fall to a level where there is a rough equilibrium between the number
of workers prepared to settle in towns for industrial employment and the
number of jobs available outside the agricultural sector.

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WAGE POLICY IN ASIAN COUNTRIES

maintain equilibrium between the supply of wage goods
immediately available and the total wage income that is being
increased by the employment of additional workers in investment industries and related activities.
The first general problem involved in adjusting the wage
level to the progress of economic development is thus seen to
consist in adapting the flow of wage income over a period
of time to the expanding flow of consumers' goods in such
a way that neither shortages nor excesses of purchasing
power disturb the smooth process of economic development. Again, the need for close co-ordination between wage
policy and the planning of economic development becomes
apparent.
More particularly, there may be a need for co-ordination
between wage policy and other government policies designed
to combat inflationary pressures. As has already been pointed
out above, programmes of economic development are likely to
generate such pressures. Since the essence of economic development is to make as intensive a use as possible of the limited
resources available in Asian countries, it is only natural that
this should be the case ; it follows, however, that most Asian
governments will find it necessary to take measures to keep
inflationary pressures within as narrow bounds as possible.
They may find it necessary to use such means as fiscal and
monetary policy, direct control of investment, the allocation
of raw materials, rationing and price control. In some cases
there may also be a need for some control on wages as an antiinflationary measure.
Some groups of Asian wage earners have already passed the
stage of depending on government intervention for the improvement of their living standards ; effective trade unions
have been formed, for example, in the transport industry.
Moreover, it must be expected that the number and strength
of trade unions will increase in the not-too-distant future.
Where strong unions have come into existence it may be
necessary for the government to call on them and on employers'
organisations to shape their wage policies in accordance with
the economic needs of the country and to co-operate with the
government in carrying through programmes of economic
policy, especially when increased demand for certain groups
of workers with special skills strengthens the bargaining
position of the unions concerned.

WAGE POLICY AND ECONOMIC DEVELOPMENT

119

Wage policy in this sense is an extremely delicate matter,
as experience in industrialised countries has shown. 1 Few
general rules with respect to the shaping of such policy can
be given. I t would seem, however, to have but slight
chance of success unless at least the following conditions are
satisfied :
(1) A government that appeals to organised labour for
collaboration in questions of economic policy should clearly
state what that policy is, why it is thought to be necessary, and
why the co-operation of the trade union movement is essential
if the policy is to be carried out.
(2) Whenever moderation in wage demands is asked of
the trade union movement, it should be made clear that other
groups of the population will also assume their fair share of
the burdens that have to be imposed ; it would also seem
indispensable to consult representatives of organised labour
on proposed government wage policy and to inform them of
the government's intentions in respect of related measures
of economic policy, such as taxation, control of prices and
profits, and the rationing and subsidising of essential consumers'
goods.
(3) The leaders of the trade union movement should be
able and willing to evaluate the economic and social needs of
their country, the impact of their actions on the economic and
social position, and the necessity, in the long-run interests of
their own membership, of taking into account the requirements of rapid economic development when shaping their
own wage policy.

PROFIT-SHARING

Profit-sharing or the award of bonuses based on profits
are sometimes advocated as a means of raising workers'
incomes in step with economic progress. For example in a
number of Latin American countries the workers have legal
rights to a share in profits, and proposals for the introduction
by legislation of a general scheme of profit-sharing applicable
1
Cf. Report of the Director-General, Keport I, International Labour
Conference, 34th Session, Geneva, 1951 (Geneva, I.L.O., 1951), Chapter I I .

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WAGE POLICY IN ASIAN COUNTRIES

over a wide range of industry have been considered by the
Government of India since 1947.1
Systems of profit-sharing raise a number of general problems concerning, for example, the nature of profit-sharing
(whether it is an ex gratia payment or recognition of some sort
of right) ; the question whether the principle of profit-sharing
implies that the workers should also share in losses ; the
possibility that solidarity among the workers will be weakened
and the growth of trade unions hampered ; the danger that
workers will lose part of their independence and mobility ;
fluctuations in the wage earners' total income ; and so on.
These problems need not be discussed in this report ; two
points may, however, be briefly noted. First, as a device for
enabling workers to share in the benefits of economic progress
profit-sharing is likely to function in a somewhat arbitrary
way. Increasing efficiency and output, if they do not lead to
lower prices, will to some extent be reflected in higher profits,
especially when wages rise only slowly : to that extent profitsharing has indeed the advantage of providing a rather rapid
and automatic adjustment of the workers' income to rises in
national income. But economic progress does not result in
equal increases in profits in all industries. In some, such as
public utilities, and in government services in general, profits
may not rise at all, since such industries or services may not
attempt to make profits. In industries where competition is
keen, profits will rise less than in those where competition is
imperfect or absent. Moreover, to a large extent profits are
the result of fortuitous factors, such as fluctuations in foreign
demand, by which some industries benefit while others do not.
Thus, if a large part of the benefits of economic development
were distributed among wage earners through schemes for
profit-sharing, the part accruing to any particular group might
be largely the result of sheer chance. If profit-sharing is to be
accepted as one method of distributing the fruits of economic
development, it should at least be supplemented by measures
designed to ensure a more general and more equal rise in wage
earners' income through a rise in wages proper.
In India two other objections have been raised against
profit-sharing. First, during 1949 the possible inflationary
effects of the distribution among the wage earners of substantial
1
P. S. NARASIMHAN : " Profit-Sharing : A Eeview ", in
Labour Review, Vol. L X I I , No. 6, Dec. 1950, p. 496.

International

WAGE POLICY AND ECONOMIC DEVELOPMENT

121

amounts in cash as a profit bonus caused some concern.
Secondly, it has been reported that some of the Indian Ministries, when studying the implications of a proposed scheme
for large-scale profit-sharing, felt strongly that under the
prevailing economic conditions the sharing of profits with
labour might result in an irrational distribution of capital,
so hindering the Government's industrial programme, and
would discourage the investment of fresh indigenous and
foreign capital in Indian industries. 1 These two objections,
unlike those mentioned above, would seem to apply not only
to profit-sharing but to any effort to raise the workers' income
through a reduction in profits. The possible inflationary
effects of such redistribution of income have already been
mentioned in Chapter IV. Essentially, the difficulty is not
that wage earners' incomes are rising but that, on the average,
wage earners save less (if they save at all) than higher income
groups. The problem would be solved if workers could be
brought to save more ; indeed, such a solution would seem to
be of considerable social importance. If wages are for a time
kept low in order to maintain or raise the community's rate
of private saving, the existing inequality in the distribution
of income will not be diminished ; on the contrary, it may be
made worse. If private saving and capital formation are limited
to the well-to-do, the concentration of property in the hands
of a relatively small proportion of the population will be increased. Private capital being one of the main sources of private
income, there will also be a tendency towards further concentration of income. 2 Such a development may perhaps be necessary
in the interest of economic progress, but it can scarcely be
regarded as satisfactory from the point of view of social
betterment.
The Indian Committee on Profit-Sharing, in its proposals
for a large-scale scheme of profit-sharing 3, proposed that part
of the share going to labour should not be given in cash but
should be held on the worker's account, either in his provident
fund or otherwise. In June 1949 the Indian Government issued
an ordinance empowering industrial tribunals, when making
1

2

NAKASIMHAN, op. cit.,

pp.

496

and

498.

Cf. A. VEBMEULEN : "Collective Profit-Sharing", in International
Labour Review, Vol. LXVII, No. 6, June 1953, p. 495.
3
Government of India, Ministry of Industry and Supply : Report of
the Committee on Profit-Sharing (New Delhi, 1948).

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WAGE POLICY IN ASIAN COUNTRIES

an award in an industrial dispute concerning a profit bonus, to
direct that part of the bonus should, under certain conditions,
be paid in the form of Post Office National Savings Certificates.1
These examples show that, at least in principle, it is not
impossible to raise the workers' savings while at the same time
keeping the inflationary impact of a shift from profits to wages
within reasonable bounds. In fact, wage earners would, under
the above proposals, receive some future claim to the productive wealth they have been producing instead of to consumers' goods that are not yet being produced in sufficient
amounts. Workers might, for example, be permitted after
some years to sell their savings certificates for the purpose of
buying an appropriate dwelling built under a programme for
construction of workers' housing. Thus, although consumption
out of the workers' incomes might, to some extent, be regulated
and adjusted to the available amount of consumers' goods,
it would not be necessary to limit these incomes to the current
supply of such goods. The fact that such regulation would
probably be easier to operate if applied to an annual profit
bonus than through the " freezing " of part of the regular
wage might be regarded as an argument in favour of profitsharing.
T H E W A G E STRUCTURE AND ECONOMIC DEVELOPMENT

The term " wage structure " covers, on the one hand, the
pattern of wage differentials among occupations, types of
wage earner, firms, industries and regions and, on the other
hand, the various components of wage earnings. The wage
structure, as well as the general level of wages, may be the
object of measures of wage policy.
Generally speaking, wage differentials may be of importance
from the point of view of allocating labour and other economic
resources ; or of social justice, in so far as they are or are not
in accordance with accepted standards, for example of equal
pay for equal work or of equitable wage differentials for
different types of work. The various components of wage
earnings, on the other hand, may be important as incentives
to the individual worker as regards the way in which he performs his normal duties.
1

Industrial

Awards in India, op. cit., p . 75.

WAGE POLICY AND ECONOMIC DEVELOPMENT

123

As a general rule it might be argued that large wage
differentials between regions and industries may have the
effect of distorting the pattern of production in a country since
low-wage areas and industries tend to attract more capital
and enterprise than would be justified by basic economic
conditions. For example, the rather substantial wage differentials between industry and agriculture in Asian countries
noted in Chapter I might be said to have the effect of hampering
industrialisation and perpetuating the heavy emphasis in
these countries on agricultural production. 1 More generally,
it has been argued that industries that have to rely on exceptionally low wages in order to survive have no right to
exist ; while there is an element of truth in this reasoning, it
has been suggested in Chapter IV that it should be applied
very cautiously.
Differentials based on skill may serve the purpose, on the
one hand, of inducing able workers to improve their vocational
skills and, on the other hand, of allocating skilled labour
among the firms and industries which, because of higher
general productivity, are able to make the best use of its
services. In many cases it may be presumed that market forces
will adequately determine differentials based on skill and that
there is no immediate need for special measures of wage policy
in this field. Wherever such differentials are fixed or implied,
for example under arbitration awards or minimum wage
regulations, due regard should be had to the need for determining wage differentials that conform with the relative scarcity
of the particular skills concerned.
Systems of Payment by Results
Incentive wage systems may play an important part in
improving productivity, particularly in industry.
There
undoubtedly is considerable scope in Asian countries for
improvement in the utilisation of plant, equipment and
materials. Such improved utilisation of scarce resources has
economic effects similar to those of new capital formation
obtained without restrictions on consumption. Among systems
of remuneration that may help to improve the utilisation of
scarce resources, the most important are the following :
1
Cf. C. M. PALVIA : An Econometric Model for Development Planning
(with Special Reference to India) (The Hague, Institute of Social Studies,
1953), Chapter VIII.

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WAGE POLICY IN ASIAN OOUNTEIES

(1) Those which lead to direct savings in the use of capital,
such as bonuses for exercising care in the use of tools and other
equipment, premiums for the saving of raw materials, etc.
Techniques for the establishment of such systems of payment
have been developed in most of the industrialised countries,
and the provision of technical assistance in these matters
should prove useful.
(2) Those which lead to a more intensive utilisation of
the available capital. The obvious way of attaining this
objective would be the introduction of systems of payment by
results ; in this field again, technical assistance based on the
experience of industrialised countries should prove useful.
While the introduction and dissemination of incentive
wage systems falls somewhat outside the normal scope of
wage policy, it is important that, when fixing wages under
arbitration awards or statutory regulations, the government
or other authorities should pay due regard to the functioning
of existing systems of remuneration. For example, it has been
found in some cases that the award of substantial flat-rate
cost-of-living allowances has considerably blurred the incentive
effects of systems of payment by results.
In a number of cases, systems of payment by results have
already been successfully applied in Asian countries.
In
Ceylon, for example, piece-work has been extensively applied
for many years on the tea and rubber plantations and in certain
dock works. In India systems of payment by results are
operated in the textile industry, in some mines and in the
metal trades and, on a smaller scale, also in the building and
clothing industries. In Pakistan piece-work is found in certain
railway workshops and in the entire mining industry (except
for underground chrome miners). From these three countries
favourable effects on productivity and production have been
reported. 1 A recent I.L.O. technical assistance mission operating in India at the request of the Indian Government in the
textile and engineering industries had as its object to show
how productivity and earnings could be raised by the application of modern techniques of work study and plant organisation and, when appropriate, by the introduction of suitable
systems of payment by results.
1

See I.L.O. : Payment by BesuUs, Studies and Reports,New Series, No. 27,
(Geneva, 1951).

WAGE POLICY AND ECONOMIC DEVELOPMENT

125

However, it has also been observed in some cases that
workers have shown little disposition to respond to higher
pecuniary remuneration by increasing their effort or output ;
the indifference of the workers concerned seemed to be due to
their limited wants. In such cases the introduction of incentive
systems of remuneration can serve no useful purpose. If higher
payment as a reward for harder work leads to a higher degree
of labour turnover, it may even be disadvantageous. Considerable numbers of wage earners in Asian countries are only parttime workers, who accept employment for wages to bridge the
gap between the minimum needs of their families and the
income they earn from their own small plots of land ; for them
employment for wages loses its interest, and they return to
their villages, as soon as this gap has been filled. Where this
is the case, the various advantages and disadvantages of any
proposed change in the system of remuneration deserve
critical and thorough examination before any decision is taken
upon it.
As a basis for the promulgation of policy regarding
systems of remuneration it would therefore seem desirable
to obtain as much information as possible on—
(1) The results in practice of the application of systems
of incentive payments ; methods of measuring the degree
of success obtained and the costs involved ; and causes of
success or failure.
(2) The relative urgency of increases in production in
various regions and industries and the likelihood that the
application of new or amended systems of remuneration in
those regions and industries would help to secure the desired
increases in output.
(3) The possibility of adapting systems of payment by
results to the special preferences and needs of Asian workers.
It may be found, for example, that, while some groups of
wage earners are relatively indifferent to an increase in money
earnings, the prospect that by working harder or more accurately they might more rapidly acquire, say, " points " for
the acquisition of a small plot of land or a dwelling would
be an effective incentive.
On the basis of information on these matters a programme
might be drawn up indicating the scope for changes in existing

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"WAGE POLICY IN ASIAN COUNTRIES

methods of remuneration. Once a well considered list of
urgent tasks in respect of methods of remuneration has been
drawn up, the government concerned could work out a programme of action to stimulate the introduction of new systems
of payment. Such a programme might cover the questions
of disseminating technical information on the subject and,
where necessary and appropriate, enlisting foreign technical
assistance and providing aid to industries in which a revision
of existing systems of remuneration seems particularly urgent.
T H E ADJUSTMENT OF WAGES TO CHANGES IN
THE COST OP LIVING

The adjustment of wages to changes in the cost of living
has been one of the most debated issues of wage negotiations
and wage policy in recent years. It is not possible to say
whether, in general, wages should or should not be adjusted :
in some cases full adjustment may be found to be justified,
in others partial adjustment only, in still others, no adjustment at all. In fact the problem is similar to that of assessing
the appropriate level of the minimum wage. When prices are
rising it will generally be considered desirable to protect
wage earners against a fall in their standards of living, but the
question immediately arises whether it is economically feasible
to do so.
For instance, if prices rise as a result of a crop failure it
will be virtually impossible to avoid some reduction in workers'
living standards and, unless some system of food rationing
is introduced, it will also be impossible to avoid a rise in
prices. Conversely a period of falling prices may appear to
offer a good opportunity to allow real wages to rise -, but if,
for instance, prices are falling because of a slump in export
prices, there will have been a fall in the capacity to pay wages
and it may even be difficult to avoid some reduction in the
living standards of the workers.
As noted in Chapter I I I , a number of regulations in Asian
countries provide that mimmum wages may be adjusted to
changes in the cost of living, although there is usually no
formal obligation involved. In some Latin American minimum
wage regulations changes in the cost of living are explicitly
mentioned as one of the factors to be taken into account when
the minimum wage is being revised. Beyond the realm of

WAGE POLICY AND ECONOMIC DEVELOPMENT

127

minimum wage regulation some Indian tribunals have awarded
dearness allowances, but there is no uniformity with respect
to the degree of compensation for rising prices ; one of the main
considerations on which the decisions were frequently based
was capacity to pay. 1 Although it is impossible to frame a
general rule concerning the adjustment of wages to fluctuations
in the cost of living, consideration might be given to the question whether, in the case of the very lowest paid workers, at
least partial protection against rises in the price level could
not be guaranteed by fixing a minimum wage for these workers
partly or wholly in kind. They would then be saved serious
losses of real income during the periods which necessarily
elapse between an increase in the cost of living, its statistical
measurement, and the final revision of the minimum wage or
the dearness allowance. The fixing of minimum wages entirely
in kind has, indeed, been recommended in some cases, although
not on the grounds just mentioned. 2 Needless to say, under
any regulation of minimum wages in kind precautions would
have to be taken to prevent and counteract abusive practices.

1
Industrial Awards in India, op. cit. pp. 32 ff. ; cf. also Report of the
Committee on Fair Wages, op. cit., pp. 24-25.
2
See, for example, the resolution adopted by the Asian Eegional Conference of 1950 concerning agricultural wages and incomes of primary
producers, in Industry and Labour, Vol. I l l , No. 7, 1 Apr. 1950, pp. 250-253.

9

CHAPTEE VI
CONCLUSIONS
The average living standards of the working population
in Asia, of which wage earners constitute only a small proportion, are very low in comparison with those in economically
developed countries. Wage policy is but one of a number of
measures needed to improve these living standards. Of the
other measures the most important will be economic development to increase national income.
The main objectives of wage policy in Asia appear to be
(a) to abolish malpractices and abuses in wage payment ;
(b) to set minimum wages for workers whose bargaining
position is weak because they are either unorganised or inefficiently organised, accompanied by separate measures to
promote the growth of trade unions and collective bargaining ;
(c) to obtain for workers a just share in the fruits of economic
development, supplemented by appropriate measures to keep
workers' expenditure on consumption goods in step with
available supplies, so as to minimise inflationary pressures ;
and (d) to bring about a more efficient allocation and utilisation of manpower through the operation of wage incentives—
particularly through wage differentials and, where appropriate,
systems of payment by results.
Before the Second World War there was little state intervention in wage determination in Asian countries. Since the
war the State has played an increasingly active role, particularly through the enactment in an appreciable number of
countries of minimum wage legislation, and through legislation
for the settlement of industrial disputes. The scope, application and degree of enforcement of wage legislation vary
greatly and the wages of large groups of workers in Asia are
still unregulated. This is particularly the case in agriculture,
in cottage and small-scale industries and in personal service.
The formulation and execution of a comprehensive wage
policy capable of achieving the objectives referred to above

CONCLUSIONS

129

and suited to the needs and conditions of Asian countries
raises a number of problems which call for special consideration
and investigation.
T H E CONTENT OF MINIMUM WAGE REGULATION

Eapid economic development is the most important
objective of economic policy in Asian countries and there are
few questions of social policy which can be considered independently of this objective. If minimum wage regulation is to
result in something more than the mere legal confirmation of
the existing level and structure of wages, programmes of wage
policy must be planned and executed in close co-ordination
with policies for economic development. The purpose of such
co-ordination is to ensure that the aims of wage regulation
are compatible with the targets set for production, employment, the balance of payments and other strategic factors
affecting the expansion of the economy. The larger the difference, in any country, between the prevailing pattern of wages
and the pattern that it is the purpose of the minimum wage
policy to attain, the more effective must such co-ordination be.
The need for co-ordination is likely to have a decisive
influence on the type of machinery chosen to determine, for
example the level of wage costs in major industries or the
economic feasibility of a rise in workers' living standards.
This choice will also be affected by a number of other circumstances which may differ from country to country : the nature
and the method of administration of the programme for
economic development, the existing economic structure and
the changes which it is intended to bring about in the pattern
of production and employment, the opinion prevailing on the
necessary extent of government intervention in economic and
social matters, the ratio between prevailing wage rates and the
targets of wage policy, and the availability of competent and
responsible representatives of various interests.
If wage
policy is to prepare the way for the development of collective
bargaining, it will be important that workers and employers
should be adequately represented. It follows from what has
been said above about co-ordination that arrangements should
also be made to associate with the process of minimum wage
determination the authorities responsible for the government's
policy in related fields.

130

WAGE POLICY IN ASIAN COUNTRIES

In deciding on the level of the minimum wage the vital
criteria are workers' needs and economic feasibility. Neither
provides an absolute standard. There is a very wide gap
between the present living standards of workers in Asian
countries and even a fairly low estimate of their needs. This
gap cannot be bridged quickly. The important thing is to
make steady and sure progress towards reducing it. Similarly,
as regards economic feasibility, the needs of rapid economic
development, considered alone, might suggest that relatively
few resources should be allocated to raising hving standards
in the near future, so that as much as possible can be allocated
to investment designed to raise productive capacity. But
when workers' needs are considered it becomes apparent that
the rate of economic development has to be adjusted to
provide for the satisfaction of at least the most urgent needs
for improved living standards.
The average minimum wage for each country will thus be
determined in the light of the decisions of the responsible
authorities as to the best balance to strike between workers'
needs and the rate of economic development. This balance
will depend upon what assessment is made of the probable
economic consequences of different wage levels—their immediate
effect on prices, employment, output, the balance of payments,
savings, investment and other relevant factors, and the final
effect they are likely to have on the basic objectives of the
programme for economic development.
This does not mean, however, that a uniform wage should
immediately be fixed for all workers in all industries, even
though there are strong arguments in support of such uniformity. In view of the wide differences in the capacity to
pay wages in various sectors of the economy, such a uniform
minimum wage would either have to be fixed at a very low
level or, if fixed at a higher level, would involve such a large
disruption in the economy as to make it unenforceable. I t is
likely therefore that different minimum wage rates will have
to be fixed at least at the beginning for a number of broad
groups of wage earners (for example, those engaged in agriculture, village industries, plantations, manufacturing, transport and government undertakings). Within each group,
individual sections might be awarded different wage rates
related to the minimum established for the group as a whole.
As economic development succeeds in achieving a more

CONCLUSIONS

131

efficient allocation of resources, the capacity of different
industries to pay wages should tend to become more nearly
equal and the minimum wages fixed for different industries
can be more uniform. Indeed, the periodic review of minimum
wages in the light of changing conditions, such as fluctuations
in the cost of living, improvements in workers' productivity,
and the general progress of economic development, should be
an esssential element of minimum wage policy.
The need to find the desirable level for the average minimum
wage and the need to fix different minimum wages for various
industries or regions lead to the conclusion that provision
should be made for co-ordination not only of the decisions of
wage fixing and other authorities but also of the decisions
taken by the agencies responsible for fixing wages in various
industries or regions.
As regards wage differentials, it seems doubtful whether
minimum wage regulation should provide for differentials
based on skill, since the additional technical work required
for their establishment would at least seriously delay the
implementation of minimum wage regulations. As for differentials according to sex, it would hardly be possible for
minimum wage regulation to abolish them immediately, but
their gradual elimination might be accepted as an ultimate aim.
Special problems exist in industries producing raw materials
for world markets. Since competition in these markets is almost
perfect, it is difficult for any single country to raise its wage costs
without prejudice to its position in the world market ; this problem might be lessened if countries exporting the same primary
commodity were to proceed simultaneously with minimum wage
regulation in the industry concerned. The frequent and violent
fluctuations in the prices of primary products raise a further
difficulty : in this regard consideration might be given to the
desirability of fixing minimum wages in the industries concerned
on the basis of a reasonable average selling price and on the
understanding that, while the minimum wage would not be
raised in the case of a short-term rise in the price of the product, it would not be reduced during periods of falling prices.
INSPECTION AND ENFORCEMENT

The most difficult aspect of minimum wage regulation in
Asian countries is enforcement, which is fundamentally a

132

WAGE POLICY IN ASIAN COUNTRIES

question of the attitude of the general public. The immediate
problem, however, is the shortage of adequately trained
inspection staff. When minimum wage regulation is extended
to agriculture, cottage and small-scale industries, the difficulties of enforcement will be further increased by the large
number of small producing units in those economic sectors.
Asian governments will therefore have to take all possible
steps to lighten the task of enforcement and to strengthen
labour inspection. Such steps might include the following :
(a) the setting up of a separate wage administration service
charged with special responsibility for the enforcement of
wage regulation ; (b) simplification of minimum wage regulations ; (e) raising the pay and social status of labour inspectors ; (d) entrusting part of the inspection work to persons
who, though not on a regular inspection staff, maintain contact
in some official capacity with industries where a minimum
wage regulation is applied ; (e) securing full co-operation of
employers' and workers' organisations ; (f) legal protection,
particularly from discharge, of individual workers who report
infringements ; (g) making the penalty for infringements
severe.
W A G E POLICY AND ECONOMIC DEVELOPMENT :
THE

PROBLEM

OF

CO-ORDINATION

As national income rises with the progress of economic
development, the national wage bill will also tend to increase.
This rise in the total sum of wage payments may take two
extreme forms : the level of real wages may be kept more or
less constant and the volume of employment increase, or the
level of wages may rise while employment increases less, if at
all. Where there is much unemployment the former alternative
may be considered preferable on social and economic grounds.
In this case it may be necessary to avoid measures of wage
policy that would bring about or encourage substantial
increases in wages in the short run.
The existing wage structure in most Asian countries
appears to be not altogether satisfactory. Large wage differentials among firms and industries for comparable occupations
have been reported to be a cause of industrial disputes and
unnecessary labour turnover and to hamper the efficient
allocation of manpower. In certain cases statutory wage

CONCLUSIONS

133

regulation or wage fixing by arbitration awards or conciliation
procedures may be instrumental in overcoming such problems
by introducing a more rational pattern of wage differentials ;
but in other cases the structure of wage differentials based
on skill and occupation may better be left to the operation of
market forces.
With a view to increasing both the efficiency and the
earnings of workers, improvements in existing systems of
remuneration may be desirable, including in certain cases the
introduction of appropriately designed systems of payment by
results. In order to formulate a policy in this matter information is needed on (a) the results of the application of different
systems of remuneration and the causes of success or failure ;
(b) the relative urgency of increases in production in various
industries and the likelihood that the application of systems
of payment by results would help to secure the desired increases in output ; (c) the possibility of adapting systems of
payment by results to the special attitudes and needs of Asian
workers.
On the basis of an investigation of these matters a programme of action could be drawn up for the promotion of
improved systems of payment including the dissemination of
technical information on the subject and the provision of
technical assistance and other aid to industries in which a
revision of existing systems of remuneration seems particularly
urgent.
T H E PBOBLEM OF THE SUPPLY OF ESSENTIAL
CONSUMÉES'

GOODS

Wage policy, by itself, can make only a minor contribution
to expanding the supply of essential consumers' goods, which
is the basic factor determining workers' standards of living.
Because of the need to increase employment and divert
resources to capital formation, the supply of essential consumers' goods and hence the level of workers' real income may
not rise appreciably in the early phases of economic development. On the other hand, the awakened social consciousness
of Asian countries demands that their living standards should
improve as rapidly as possible in the course of development.
To resolve this dilemma the countries of Asia will have to
ensure that total output rises as fast as possible and that the

134

WAGE POLICY IN ASIAN COUNTRIES

demand for capital conflicts as little as possible with the
demand for consumers' goods. In particular, measures should
be taken to ensure (a) the effective utilisation of surplus
labour ; (b) the rapid spreading of improved techniques
requiring little additional capital ; (c) the careful selection of
appropriate capital investment projects, with special emphasis
on essential consumers' goods industries and on breaking
bottlenecks in the production of basic materials ; (d) the most
economic use of resources available for purchasing imports ;
(e) the restriction of non-essential consumption and investment.
If all these lines of action can be pursued simultaneously
with vigour and determination, it seems reasonable to suggest
that the supply of essential consumers' goods, the level of
workers' real wages and the level of living standards in Asian
countries can rise at a satisfactory rate, even in the early
stages of accelerated economic development.

APPENDIX
RESOLUTION CONCERNING WAGES
Adopted by the Asian Regional Conference of the International
Labour Organisation (Tokyo, September 1953) 1
Whereas the International Labour Organisation has a solemn
obligation to further among the nations of the world programmes
which will achieve policies in regard to conditions of employment,
particularly wages and earnings, calculated to ensure a just share
of the fruits of progress to all, and a minimum wage to all employed
and in need of such protection ;
Whereas the Asian Begional Conference in 1947 recommended
action by the governments of Asian countries designed to assist the
conclusion of collective agreements and, when the necessary conditions of collective bargaining are not satisfied, to provide for the
fixing and enforcement of fair wages 2 ;
The Asian Begional Conference of the International Labour
Organisation, having met at Tokyo, adopts this twenty-fourth day
of September 1953 the following resolution :
Having regard to the need to improve the standard of living
of the people of the Asian countries and to the essential interrelation
between the regulation of wages and the requirements of economic
development of these countries, the Conference considers that—
(a) it should be the common objective of governments, employers
and workers to establish wages at the highest possible level
which the economic condition of each country permits, and in
future such wages should aim to provide the worker with a
fair share of the increased prosperity of the country as a whole
resulting from economic development ;
(b) to this end collective agreements between employers and workers
are normally the best means for the determination and adjustment of wages, and the development as soon as possible of free
associations of employers and workers and- systems of collective
negotiation based on such associations, if possible on an industrywide or regional basis, or both, should be actively promoted
and encouraged by all concerned ;
(e) pending the general development of effective systems of collective negotiation in each country, there is a pressing need for
the immediate introduction of statutory measures to regulate
wages in occupations in each country in which collective bargaining is not effective or is non-existent and as a preliminary step
towards the development of systems of collective negotiation ;
1
2

This resolution was adopted unanimously.
See Official Bulletin, Vol. X X X , No. 3, 15 Nov. 1947, pp. 178-180.

136

WAGE POLICY IN ASIAN COUNTRIES

(d) the determination and adjustment of wages by statutory
means, with the object of prescribing a minimum wage or wages,
should be arranged through tripartite machinery, such wage or
wages to be subject to review when necessary or at regular
intervals ;
(e) such machinery should afford equal representation of workers
and employers, where possible nominated by their respective
organisations or otherwise appointed after consultation with
such organisations ; an independent chairman and any independent members should be appointed either by agreement
between the members constituting such a tripartite body or by
the government, so far as possible in conformity with the views
of the organisations concerned ;
(f) the wages resulting from this machinery should be statutorily
enforced with the sanction of penalties sufficiently severe to deter
non-observance ;
(g) in order to make statutory wage regulation effective, there should
be an authority in each country fully empowered by law, and
adequately staffed and equipped, to carry the responsibility for
the enforcement of statutory wage provisions ;
(h) the work of this authority should be facilitated by such means
as the framing of wage provisions in a simple form easily understood by all concerned, the provision of inspectorate staff
suitably qualified, trained in their work and adequately remunerated so as to ensure that they inspire the confidence of
employers and workers alike, and the laying down of procedures
for bringing complaints of infringement of wage provisions to
the notice of the enforcing authority without risk or detriment
to the worker's livelihood ;
(i) in order to ensure that, in the general operation of statutory
wage fixing systems as described above, as well as in the operation of systems of collective negotiation as and when they
develop, consideration is given to the utmost extent possible to
maintaining a relationship between the wage regulation and the
requirements of economic development, there should be arrangements for continuing consultation between governments,
employers and workers so that policies in the field of wage regulation and economic development may be co-ordinated, framed,
implemented and enforced with the widest possible measure of
agreement between the parties concerned ;
And requests the Governing Body to transmit this resolution
to the governments concerned.

INDEX
A
Agrarian reform, 27, 93
Agriculture, 34, 76, 93, 115, 123, 132
Incomes in, 115-116, 117 n.
Minimum wages in, 44, 49, 52, 58, 61 ff.,
71-72, 79, 97 n., 98 n., 103, 109,
112, 128
Allocation of materials, 37, 118
Andrus, J . Russell, 4 n., 19
Arbitration, 39-40, 52 ft., 69 fi., 74, 82,
97, 123-124, 127, 133
Australia, 82-83, 97
B
Bakuls, 23
Balance of payments, 75,90,92-93,100 ff.,
130
Bank Indonesia, 18 n.
Baran, Paul A., 105 n.
Bottlenecks, 34, 134
Bribes, 110
Burma :
Arbitration, 53-54, 70
Conciliation, 54
Minimum wage regulation, 49-50, 57 ff.,
64

Collective bargaining, 26, 39, 44-45, 72-73,
78, 82, 107, 128-129
Commerce, 7, 72
Communications, 29
Community projects, 33
Competition, 91-92,95-96,101,116,117 n.,
120, 131
International, 39
Concüiation, 39-40, 52-57, 69 ff., 74, 133
Construction, 37
Consumers' goods, 37-38, 39, 47, 90, 92 ff.,
100, 103, 117, 122, 128, 133-134
Consumption, 28 ff., 37, 84, 87, 93, 105
Conspicuous, 11
of Fibres, 10
of Food, 9, 31 n., 93
Per head, 30
Consumption goods industries, 31 n., 34,
134
Consumption unit, 86
Co-ordination of policies, 46-47, 72, 74-75,
87-88, 102, 108, 118, 129, 131, 132-133
Copland, D. B . and Foenander, O. de R.,
97 n.
Cost of living, 20, 76, 85, 115, 131
Allowance 46, 49, 59, 64, 72, 124, 127
Changes in, 39, 4 1 , 46, 59, 72, 88, 112,
126-127
Credit facilities, 99, 106

C
Capacity to pay, 15, 46, 51, 59, 77 ff.,
81, 84-85, 87 ff., 90, 92, 96 ff., 104,
106, 126-127, 130-131
Capital :
Equipment, 28, 34, 36-37, 91, 95, 99,
103, 123-124
Formation (see Investment)
Imports, 37, 121
Output ratio, 29-30, 35, 113
Scarcity, 29, 31, 106, 113 ff.
Utilisation, 124
Capital intensive processes, 114 ff.
Ceylon :
Arbitration, 53-54
Conciliation, 54
Distribution of income, 13, 15
Minimum wage regulation, 50, 58 ff.,
63, 65, 103 n.
Payment by results, 124
Chandrasekhar, S., 13 n.
Chaturvedi, S. C , 20 n.
China :
Distribution of income, 12
Minimum wage regulation, 50, 59
Clark, Colin, 2, 8 n., 30 n.
Cole, G. D. H., 32 n.

D
Da Costa, E., 91 n.
Daya, E., 52 n.
Dearness allowance (see Cost-of-living
allowance)
Debt (see Indebtedness)
Demand :
Effective, 93, 100
Foreign, 101 ff., 120
for Labour, 81
for Raw materials, 101 ff.
for Skills, 83
Depreciation allowances, 34
Depressed areas, 89
Devaluation, 103
Diets, 91
Dividends, 104
Dobb, Maurice, 33 n.
E
Earnings, 32
Deductions from, 40 ff., 49, 63
Increases in, 117
Economic Commission for Latin America,
102

138

INDEX

Economic development, 10, 26, 28 ff., 35,
39, 44, 79, 81-82, 85, 87-88, 94, 98-99,
103, 106, 108-109, 112 ff., 117 ft., 129130, 132-133
and Living standards, 32,44, 46-47,112
and Wage policy, 47
Education, 109, 132
Efficiency (see Productivity)
Employment, 40, 78, 88, 90 ff., 93, 95-96,
98-100, 102, 104, 112 ff., 117-118, 130,
132
Opportunities for, 32, 35, 43, 81, 91,
99, 115 ff., 117 n. 1, 132
Wage Regulation and, 94 ft.
Employment services, 41
Enforcement of minimum wage regulations (see Minimum wage regulation :
Enforcement)
Enterprise, 31 n., 104, 106-107, 123
Equal pay for equal work, 58, 80-81, 122
Equal Remuneration Convention, 1951,
80
Equipment (see Capital equipment)
Expanded Programme of Technical Assistance, 35
Exports, 36, 93, 101-103, 126
F
Factories, 16
Seasonal, 20
Fair wages (see Wages, Fair)
Family, Size of, 80, 85 ff.
Family allowances, 86-87
Family farming, 115-116
Finance, 106
Fiscal policy, 118
Foenander, 0 . de R. and Copland, D. B.,
97 n.
Foreign trade, 31 n.
Freedom of association, 45
G
Gadgil, D. R., 91 ff., 107
H
Handicrafts, 5, 8, 16, 22 ff., 35, 41 ff.,
72, 76, 78, 93
Handweaving, 6, 8, 23, 26, 35, 98
Heavy work, 83
Homeworkers, 23
Hong Kong :
Arbitration, 53
Minimum wage regulation, 50-51, 60
Household budgets, 85 ff.
I
Illiteracy, 43
Imports, 35-36, 93-94, 103, 114, 134
Restriction of, 94, 103

Incentives, 11, 39, 46, 90-91, 106-107,
122, 123 ff., 128
Income :
Average, 8 ff., 10-11, 16, 26, 47
Distribution of, 10 ff., 32, 85, 94, 121
Redistribution of, 11,15,26-27,121-122
Indebtedness, 27, 40, 42, 105
India :
All India Cottage Industries Board, 6
Arbitration, 53 ff., 70-71, 80, 127
Committee on Fair Wages, 77 n., 80, 82,
97, 104
Committee on Profit Sharing, 121
Conciliation, 54, 70-71
Distribution of income, 13, 15
Fact-Finding Committee (Handloom
and Mills), 7 n., 23 n.
Fair wages, 66
Fair Wages Bui, 5 1 , 58
First five-year plan, 62, 67, 82, 88-89,
108
Indian Labour Conference, 62, 66-67
Minimum wage regulations, 57 ff.,
61 ff., 65 ff.
Minimum Wages Act, 1948, 51, 62
Payment b y results, 124
Profit-sharing, 120 ff.
Indonesia :
Arbitration, 53, 55, 70
Conciliation, 55
Emergency Law concerning labour
disputes, 1951, 55
Industrial Revolution, 31
Industries :
Cottage, 5-6, 8, 22 ff., 35, 72, 76, 78-79,
109, 128, 132
Expanding, 78
Large-scale, 35, 78-79, 114
Small-scale, 114, 128, 132
Stagnant, 78
Inflation, 75, 117 ff.
Inspection (see Minimum wage regulation : Enforcement)
International Labour Organisation :
Asian Advisory Committee, I I I , 43, 112
Asian Regional Conferences, I I I - I V ,
43-45, 106-107, 109-110, 112, 135
Equal Remuneration Convention, 1951,
80
Minimum Wage-Fixing Machinery Convention, 1928, 107
Protection of Wages Convention, 1949,
43 n.
Technical Assistance Programme, 34 n.,
64, 124
Investment, 11, 28 ff., 34 ff., 37, 40, 44,
87, 97, 99-100, 106, 116-117, 121, 123,
130, 134
Per worker, 35
Investment goods :
Industries, 31 n., 118
Quick and slow, 117
Irrigation, 33

139

INDEX
J
Japan, 2
Arbitration, 53, 55-56
Conciliation, 55
Distribution of income, 13, 32
Minimum wage regulation, 51-52, 5960, 67
J o b evaluation, 26, 83
K
Karkhanadar, 7, 23
K h a m b a t t a , K. J . and Shah, K. T., 13 n.
Korea, Arbitration in, 53
Kuznets, Simon, 14-15
Kyiwin, 49-50
L
Labour, Abundance of, 116
Labour force, Allocation of, 39
Labour intensive processes, 114 ff.
Labour surplus, 33, 35, 134
Labour turnover, 78, 125, 132
Landlords, 12, 93-94
M
Màhajan, 7
Maintenance of equipment, 29
Malaya, Federation of:
Arbitration, 53, 56
Minimum wage regulation, 52, 60
Malpractices in wage payment, 39, 40 ff.,
127, 128
Management, 91
Market forces (see also Supply and
Demand), 123, 133
Middlemen, 6, 23, 27, 40-41
Migrant labour, 41
Minimum wage :
Adjustments in, 46
in Agriculture (see Agriculture)
Criteria for determining, 75, 84 ff.
Economic feasibility of raising, 76, 8485, 87-88, 104, 126, 129-130, 132
Level of, 44, 46, 58 ff., 84 ff., 126, 130131
Minimum Wage-Kxing Machinery Convention, 1928, 107
Minimum wage regulation, 15, 32, 40,
43 ff., 48 ff., 57 ff., 74 ff., 103 n., 123,
129 ff.
Enforcement, 44, 61, 74, 76, 78, 109 ff.,
128, 130, 131-132
Machinery for, 49 ff., 107 ff., 129
Scope, 46, 57-58, 77
Simplicity of, 110, 132
Uniformity in, 44, 75 ff., 85, 88, 96,
99, 107-108, 127, 130-131
Misallocation of productive factors, 97-98,
105

Mobility of productive factors, 31 n., 79,
87, 95, 97 ff., 100, 115-116, 133
Moneylenders, 12, 42
Mukerjee, Radhakamal, 3 n., 20, 91 n.
Mukerji, K. P., 18 n., 21 n.
N
Narasimhan, P . S., 120 n., 121 n.
New Zealand, Minimum wages in agriculture in, 98 n.
Non-wage benefits, 46
Non-wage earners, 93, 100, 107, 115
Nurkse, Ragnar, 33 n.

0
Occupation structure, 1 ff.
Ou, Pao-san, 5 n.
Output (see Production)
P
Pakistan, 30 n.
Arbitration, 53, 56
Fair wages, 69
Payment by results, 124
Palvia, C. M., 123 n.
Payment by results, 46, 83, 123 ff., 128,
133
Penalties, 42, 49, 132
Personal services, 7, 72, 76, 128
Philippines :
Arbitration, 53, 56-57
Conciliation, 56
Distribution of income, 13
Minimum Wage Law, 1951, 52, 60, 63,
67, 107 n.
Minimum wage regulation, 52, 57 ff.,
63-64, 67-68, 76, 107
Piece rates, 6, 76, 83, 124
Pillai, P . P., 19, 21
Planning, 29-30, 37-38, 40, 117-118, 121,
129, 134
Plantations, 16, 21-22, 41, 101
Population :
Growth of, 30
Pressure of, 12, 43, 116
Post Office National Savings Certificates,
122
Prices, 92 ff., 130
Changes in, 84, 87-88, 92 ff., 96, 100 ff.,
104, 120, 126
of Food, 11
of Primary products, 22, 36, 101, 103,
131
Regulation of, 94, 118-119
Private enterprise, 31 n.
Production, 40, 92-93, 95, 96, 98 ff., 102,
114, 120, 130, 133
P a t t e r n of, 11
Primary, 2 ff.
Secondary, 5 ft.
Tertiary, 7 ff.

140

INDEX

Productivity, 12, 31, 33-34, 36, 39, 43,
47, 78, 87, 89 ff., 94 ff., 102, 104-105,
120, 123-124, 131, 133-134
Distribution of benefits of, 44, 112
Marginal, 80 n.
Profits, 90, 94, 96, 104 ff., 119 fi.
Control of, 119
Fair, 84, 87, 104
and Wages, 15
Profit-sharing, 119 fi.
Collective, 121 n.
Protection of wages, 49
Public works, 69, 105
Puerto Rico, Distribution of income in,
14
R
R a w materials, 101 fi., 104, 131
Recruiting agents, 41
Rent, 12
Riches, E . J., 98 n.
Risks, investment, 105-106
S
Sanctions, 111
Savings, 31 n., 32-33, 87, 93, 99-100, 104,
105-106, 120-121, 130
Mobilisation of, 36
Self-employed persons, 86, 93-94, 115
Shah, K. T. and K h a m b a t t a , K. J., 13 n.
Shih, Kuo-heng, 21 n.
Singapore, Arbitration in, 53
Singer, H . W., 32 n.
Sirki Khas-hi-Tatti,
6
Social policy, 39, 45-46, 48-49, 122
Social unrest, 40
Soviet Russia, First five-year plan in, 32
Standard family, 85-86
Standards of living, 10, 30 fi., 34, 40,
43 ff., 46-48, 59, 75-77, 79 ff., 85, 88 ff.,
91 ff., 94, 103, 108, 118, 126-127, 130,
133
Steindl, J., 114 n.
Subsistence farming, 41
Substitutes for raw materials, 102
Substitution :
of Capital for labour, 91, 99, 113, 116
of Imports for domestic output, 101
of Labour for capital, 99, 113
Supply :
of Labour, 81, 92
of Skills, 83, 123

T
Taxation, 15, 37, 78, 94, 119
Technical assistance (see also Expanded
Programme of Technical Assistance),
34 n., 64, 124, 126, 133
Technical training, 35
Technology, 35

Terms of trade, 36, 93, 101
Thompson, Virginia, 19, 23 n.
Trade unions, 40, 43, 45, 63, 70, 102,
111, 118-120, 128, 132
U
Underemployment, 23, 99
Undertakings, Size of, 44
Unemployment, 44, 87, 91-92, 94 ff., 99,
108, 113 ff-, 116, 132
Seasonal, 20, 27
Structural, 32
Uniformity in minimum wage determination (see Minimum wage regulation)
United Kingdom, Distribution of income
in, 15
United Provinces Labour Enquiry Committee, 15, 108
United States, 2
Distribution of income in, 13
Urbanisation, 115
V
Vermeulen, A., 121 n.
Viner, Jacob, 11 n.

W
Wage boards, 59, 65, 67, 68, 89, 107-109
Wage determination, Methods of, 39
Wage disputes (see also Arbitration and
Conciliation), 40, 53 fi., 69 ff., 72, 74,
78, 128, 132
Wage earners, 1, 3 ff., 26, 86, 120
Agricultural, 12, 17
in Cottage industries, 6, 27
in Domestic services, 7, 11, 27
in Manufacturing, 5 ff.
Savings of, 121-122
Wage-earning units, 86
Wage floor, 77
Wage goods, 117
Wage legislation, 48 ff., 128
Application of, 48
Wage policy :
Aims and objectives of, 37 ff., 44, 46,
74, 77, 81, 90, 105, 109, 112, 122,
128-129
and Economic development, 47
Effects of, 40, 44, 46, 75, 8 1 , 87-88,
108, 116 ff., 130
and Redistribution of income, 11
Wage regulation :
Principles of, 88-89, 108
Statutory, 39, 74
Systems of, 48 ff.
Wages :
Agricultural, 17 ff., 27, 45
Control of, 118-119, 122

INDEX
Differences in, 16 ff., 27, 78, 89, 115 n.,
117 n., 122 ff., 128, 131 ff.
Geographical, 83
according to Sex, 18, 58, 76, 80-81,
131
according to Skill, 82-83, 98,123,131
Fair, 39-40, 51, 66, 69, 77, 98, 122
Handicraft and factory, 22 ff.
Increases in, 44
Effects of, 90 ff.
Industrial, 17 ff., 27
in Kind, 40 ff., 49, 59, 127
Level of, 39-40, 47, 74 fí., 102, 112,
113 ff., 117 ff.
Living, 43, 89
Low, 39, 43-44, 59, 77, 79, 83, 90, 94 ff.,
123, 127

141

Money, 16, 26
Payment of, 40, 42, 49, 109
Plantation and farm, 21-22
and Profits, 15
Real, 16, 20-21, 47, 74, 126-127, 132
Structure of, 16, 27, 39 ff., 47, 74 ff.,
82, 112, 122 ff., 132
Wage standardisation, 83, 89
Wang, Foh-shen, 5 n.
Workers :
Agricultural, 12, 17 ff., 43, 58
Female, 18, 58, 80-81
Purchasing power of, 38, 93
Skilled, 18, 24 ff., 35, 82-83, 91, 118
unskilled, 18, 24 ff., 36, 43, 91, 93, 116
Workers' needs, 75, 83 ff., 130
Work study, 124

PUBLICATIONS OF THE INTERNATIONAL LABOUR OFFICE

Mig/her Productivity in
Manufacturing ¡industries
Studies and Reports, New Series, No. 38

This study is based on a draft submitted to a meeting of experts
in December 1952. The draft has been revised and expanded in the
light of the discussion which took place at the meeting, and the
volume includes the conclusions adopted by the experts.
The first part deals with the effects of higher productivity on
the worker and the share of the benefits which the worker may
expect to receive whether it be in increased money wages, the
lowering of prices for consumers' goods, social security, better
working conditions or the reduction of normal hours of work. The
possibility that greater productivity may result in some unemployment is taken into account and it is suggested that the problem should be tackled by governments, with the aid where necessary of employers and workers, by such means as minimum wage
legislation, price control, selecting the industries in which productivity increase is to be encouraged so as to minimise the displacement
of workers and assisting in the re-employment of the displaced
workers by improving vocational training and retraining facilities,
by the payment of removal grants and by energetic action to
overcome housing shortages. The many factors which affect productivity are reviewed : the size and stability of markets, the utilisation of resources, the degree of competition, the quality and flow
of materials, the availability of capital and credit, particularly
in underdeveloped countries, taxation, and the development of industrial and production engineering and the exchange of information.
Part I I turns from the general problems of increasing productivity to the steps which may be taken to raise productivity in
individual establishments, such as the modernisation of plant and
equipment, mechanisation in the handling of materials, careful
maintenance of machinery, the organisation and control of production
with a view to lowering costs and using available resources as efficiently as possible, and the development of good relations between
the personne! service and other departments in the undertaking.
Part I I I reproduces the conclusions of the meeting of experts,
which were adopted unanimously.
195 pages, including index

Price : $1.25 ; 7s. 6d.