Social Scientist. v 15, no. 173 (Oct 1987) p. 68.


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Book Review

Wage Indexation in India

POONAM GUPTA AND SANJEFV GUPFA, "'Cost of Living Adjustment : A Study of Dearness Allowance", Biria Institute of Scientific Research, New Delhi. (Allied Publishers, 1986; pp. ix : 181; R.. 75.00)

ONE of the major achievements of the organised working class in the market economies of the world, where wages arc settled between employers and employees through collective bargaining, is its right to obtain wage compensation against inflation from time to t^me through an agreed rate of dearness allowance for a given rise in cost of living. While this has become a time-honoured practice, especially since the World Wars, the actual system of calculating the rate of dearness allowance varies not only from country to country but also within different sectors in the same country. Such differences in dearness allowance calculations are so pronounced in India that it could be fairly accurately identified as the most important factor that distorts the overall wage structure in the economy.

The book under review is an attempt to catalogue the differences prevailing in the determination of dearness allowance in various sectors of the Indian economy, its movement over time and the possible burden in total wage costs by the turn of this century. The underlying motive behind the work, as is indicated in most of the chapters, is to warn the policy makers and the captains of industry that 'a developing economy like ours cannot really afford to pay wages several times higher than the average per capita income to relatively unskilled employees'. When we have succeeded in creating a large reserve army of unemployed, which is the characteristic of every capitalist economy, we should have seen to it, according to the authors, that the wage movement also reflected the state of labour market in the country. In the absence of any conscious effort in this direction and especially because of the unfettered movement of dearness allowance in wages, they find several undesirable consequences that have taken place in the economy, namely, (i) the hierarchical difference between the lowest and the highest wage earners is narrowing down fast, (ii) the



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