The Equal Remuneration Act in India was enacted to prevent discrimination between workers on grounds of gender. The preamble to the act describes it as:

The purpose of the act is to make sure that employers do not discriminate on the basis of gender, in matters of wage fixing, transfers, training and promotion. It provides for payment of equal remuneration to men and women workers, for same work or work of similar nature and for the prevention of discrimination against women in the matters of employment.

Discrimination is nothing more than the expression of a preference. In this neutral sense, without assessing either the consequences of such behaviour, or the "social justice" aspect, the right to discriminate is a desirable feature of any free society.

Individual acts of choice may sometimes result in a preference that might exclude or inconvenience a certain group. However, how valid or just is it to make such a choice illegal? Even more significant, how many profit-maximising, and efficiency--enhancing entrepreneurs would make such a choice?

Except in rare circumstance, people’s preferences are not absolute, but vary depending on other factors, main among them being the cost, or benefit of making such a choice. Under normal circumstances, the higher the cost (the lower the benefit), the less likely the choice will be made. Discrimination has a price, and the existence of this price will limit the existence of discrimination prevalent in the market.

Section 5 of the Equal Remuneration Act specifically forbids employers from discriminating against women during recruitment. It states:

In a competitive world such legislation has no bearing at all. All discrimination in the market costs money, and any profit-maximising entrepreneur would realise the costs of discrimination and do his best to remove it. During recruitment, if employers discriminate against women, and refuse to hire them, they are doing this at their own detriment. An employer would only want to hire a woman if she can display herself to be amply able to perform the task at hand. If this is so, by judging applicants on grounds other than efficiency, an employer is hiring those who are potentially less productive, or less suited to the job. Such a policy would definitely cause profits to decrease.

Profit seekers would begin employing women, and as such employment would increase. As demand for women workers increases, their wages also get bid up.

An employer hiring on bases other than an employer’s ability to contribute to firm’s productivity wouldn’t be able to persist since his willingness to operate with discrimination would confer an advantage on his competitors. If all entrepreneurs aren’t actively practising discrimination, then one who is doing so is operating under a comparative disadvantage. He must either bear these losses, or change his hiring policy.

Furthermore, during recruitment, in a world of incomplete information, employers must guess at employees’ productivity using some proxies, and gender might prove to be a possible proxy. Factors such as maternity leave, inability to work late hours, inability to work night shifts etc. are reflections of the worker’s productivity, and would go towards establishing gender as a proxy. Using such proxies economises in information, if employers later find that such proxies are wrong, they will find they are hiring workers with low productivity, and principles of profit maximisation would force them to choose new proxies.

The Equal Remuneration Act also seeks to address the issue of payment of unequal wages to men and women. It makes it compulsory for employers to pay women wages equal to those paid to men for performance of the same work. Section 4(1) states:

This law also has no relevance in a competitive world, where the employer’s primary concern is to make a profit. Perhaps, earlier when Indian industry was protected and sheltered, employers could afford to follow such potentially profit reducing policies, and still stay afloat, however, this is no longer the case today.

Productivity is defined in terms of profit statement; employers reward workers proportionate to the amount they add to revenues. When an employer estimates wages, he takes into account the following factors:

1. Intelligence 5 Leadership ability
2. Efficiency 6 Communication Skills
3. Initiative 7 Perseverance
4. Skill 8 Experience

However, an equal pay legislation such as the Equal Remuneration Act in India, seeks to determine wages on the basis of a politically motivating or social justice related factor, in this case, gender. The mutual incompatibility of the two sets of factors is obvious. While the first set might generate an efficient labour force, the second set has absolutely no relation to productivity, and hence cannot work towards an efficient labour force.

If a firm overpays, it would eventually have to close down since it would run out of money. At the same time, if a firm underpays, it is would still not be a profit yielding practise since it would lose employees to competitors. To add to it, it would suffer from over optimal quit-rates, and have to invest additionally in hiring, firing, and other training expenses.

While clearly, the search for profit would cause some entrepreneurs to set aside their taste for discrimination, it is nevertheless true that others would be willing to incur the cost. These employers would then be paying the price of discrimination in the form of decreased profits.

The extent to which the most discriminatory employers can continue this practice would be largely determined by factors beyond their control, namely, by the competitive pressures exerted by other employers. An employer’s willingness to operate under the competitive disadvantage of discrimination would confer an advantage on his competitors. So, even if some employers were willing to pay the price of discrimination, failure to respond to the continuous challenge of the market would mean eventual displacement by a more cost-effective firm.

There are several other reasons that cause unequal pay between sexes that are unconnected to any bias or prejudice on the part of the employer, known as non-discriminatory reality. Women may receive different wages because they bear children, and are hence separated from the labour force for a period, which could range between a few months and a few years. Data in Canada and the USA have found a negative correlation between female-male wage-ratios and birth rates.

To add to the problem, the Equal Remuneration Act does employers further injustice by forcing them to obliviate any difference in wages by increasing the wages of the woman. Section 4, sub-sections 2, and 3 state:

Hence, not only must an employer make sure that he pays the workers equal wages, he may not decrease wages to this purpose.

Consider the situation in light of the numerous labour laws that make it very difficult to fire any worker. An employer who hires a woman must pay her equal wages as the male worker although, she may prove to be less efficient. Furthermore, he may not decrease the male worker’s wages to fulfil this condition. Given that following such a policy might later prove to be harmful and bankrupting to the employer, one might expect him to be reluctant to hire a woman in the first place. However, the law prevents him from doing that too!! In the attempt to protect women workers from some perceived injustice, the act is exploiting the entrepreneur who is simply trying to run an honest business.

The applicability of the act does not depend upon the financial viability of the employer to pay equal remuneration as provided by it, nor does it take into account the employers’ cost constraints. And such an act has overriding effect with respect to implementation. Section 3 of the act states:

Such an act serves only to create an extremely restrictive and confining atmosphere for entrepreneurs and is in no way encouraging for industry as a whole.

It’s redundancy in a liberalised, competitive and free labour market is apparent. Given that India has entered the era of liberalisation and has begun the process of deregulation in other fields, elimination of the act is but a natural, logical, and obvious step.

Following an understanding of the Equal Remuneration Act, its various clauses, and the implications of having such a law, a study into the actual enforcement of the law would give a clearer picture of the impact of such restrictive legislation. Comprehension of how the act really works might give a more lucid idea of how useful or dispensable the act is.

For the purposes of the study of enforcement of the Equal Remuneration Act, Uttar Pradesh was selected since it is the most populous state in the country with 53.05% of population male, and 46.95% female. From Uttar Pradesh, three districts were selected: Nainital: highly developed, Kanpur: mid developed, Moradabad: backward area. In Kanpur, an evaluation of the implementation can be made since, the functional headquarters of the machinery such as Labour Commission, Regional Labour Commissioner, Assistant Labour Commissioner, Labour Enforcement Officer are located.

Table 1: NATURE OF EMPLOYMENT AMONG WORKERS IN SAMPLE

The proportion of workers who had a temporary and permanent nature of jobs among female workers: 21.25 and 34.78 respectively.

On looking into amounts of wages paid to men and women, one finds a large degree of difference in wages. Taking all sample workers together, the average monthly wages per worker for males is Rs. 808, and for females it is Rs. 791. The wage differential exists in the unorganised sector only, where female wages are 5.30% lower than male wages, as shown by the table below:

Table 2: PATTERN OF WAGES IN ORGANISED AND UNORGANISED SECTORS:

The percentage difference in the unorganised sector in various districts is: Kanpur: 6.68%, Moradabad: 4%, Nainital: 2.18%, pointing towards the fact that Kanpur has the highest wage differential while Moradabad had the lowest level.

Table 3: WAGE DIFFERENTIAL BETWEEN MALE AND FEMALE WORKERS IN UNORGANISED SECTOR BY NATURE OF EMPLOYMENT

Once again, the figures show a large degree of wage differential in Kanpur: it is the only district where a difference exists in almost all types of labour, except temporary regular employment, a category where the only difference is in Moradabad, and that too a very minimal amount: 1.22%. The rates displayed are very high: 8.80 in permanent regular employment, 16.97 in casual regular employment, 22.62 in piece rate contract work.

Investigation on discrimination through other methods and benefits awarded

Discrimination between males and females can be measured on the basis of other factors apart from wages such as:

1. Promotion and rise in salary.
2. Welfare schemes: bonus, provident fund, gratuity, pension, and annual increment.
3. Benefits: weekly holiday, earned leave, casual leave, maternity leave, medical leave, insurance against accident.

Below, is given the amounts of promotions and wage increases awarded to workers: male and female:

Table 4: PATTERN OF PROMOTION AMONG SAMPLE WORKERS (%)

Table 5: INCREASE IN WAGES IN THE LAST THREE YEARS

The district with the largest amount of difference in rates of promotion and increase in wages is Kanpur: where, in case of promotions, although the organised sector has no difference, there is a 10% difference between males and females in the unorganised sector. The fact that Moradabad reports amount of preferential treatment in terms of promotions may be attributed to the fact that there are promotions only in the organised sector, however in case of salary increases too; it is lower than Kanpur.

Lastly, one may examine discriminatory treatment by employers in terms of benefits provided to male and female workers:

A table showing the different proportions of workers receiving benefits such as bonuses, provident funds, gratuities, annual increments etc. is given below. The interesting aspect here is that the differential is roughly the same in all districts, in stark contrast to earlier cases.

Table 6: WORKERS WELFARE SCHEMES IN THE ESTABLISHMENTS/ ORGANISATIONS

There is a difference in the facilities afforded to males and females in all districts. These figures are useful to display the fact that given that the Equal Remuneration Act, covers only wages paid, a discriminating employer may follow discriminatory practices through not providing benefits such as provident fund, gratuity, bonus etc.

To sum up, one observes a certain trend in the differential in wages and other indicators such as promotion, raise in salary, etc., wherein Kanpur has the highest rate of discriminatory treatment, and Moradabad has the lowest rates. One may attempt to explain the above trend by the fact that in our sample, Kanpur has the highest numbers in the organised sectors, as compared to Moradabad and Nainital. For the unorganised sector to have a higher rate of violations is quite expected.

However as Table 3 displays, if one considers solely the unorganised sectors in the three districts, Kanpur still shows the highest rate of violation. Kanpur is the city which houses the headquarters of all major implementation officials, next one might consider Nainital which is the most developed of the three areas, and hence government presence must be large there, and last in the scale of development and government presence is Moradabad. This trend may have two possible explanations:

1. Implementation of the law is not efficient enough. The law enforcement agencies are either inactive, or corrupt.
2. The source of wage discrimination is in the nature of demand and supply of labour. Discrimination against women exists in terms of availability of job opportunities: occupations and organisations where women could find work is very limited compared to those of men. This lack may be result of socio-historical reasons, and not differences in real economic value of contribution of female labour.

Hence to determine the causal factors behind such difference in wages, it would be useful to examine the implementation of the law.

The law is mainly maintained via labour inspectors. Section 9, clauses 3 and 4 lay down their functions as:

Clause (3): An Inspector may, at any place within the local limits of his jurisdiction,

Clause (4): Any person required by an Inspector to produce any register or other document or to give any information shall comply with such requisition.

During this tour, if the inspector feels that two workers are performing work of a similar nature, he has full power to order the employer to pay same wages to both workers.

There are therefore, several links in the chain where implementation could break down leading to non-enforcement of the act: the first step obviously being the periodicity and thoroughness of the inspection by labour inspectors. In Kanpur, 50% of the respondents reported visits by labour inspectors, in Moradabad 30% of the respondents reported visits, and in Nainital the number was 70%.

The next step relates to the thoroughness of the check carried out by the inspector. Labour Inspectors are generally over-burdened with work: they are never large enough in number and they must oversee not only the Equal Implementation Act, but also 28 other laws. The Assistant Labour Commissioner: Mr. K R Sawhney, Delhi has said that he has only 60 labour inspectors to enforce all of the labour laws in all of Delhi. He claims that he is sorely short-handed, and consequently the quality of enforcement suffers. Mr. Sawhney says that as far as the Equal Remuneration Act is concerned, enforcement in Delhi is accorded very little importance, 90% of the time inspectors act on it only when a complaint is received.

However, even if inspectors did conduct timely and efficient inspections on the factories, there are still hurdles to efficient implementation of the law in the shape of workers’ reluctance to make complaints or give accurate information about levels of wages paid out to them. In the above survey, 35.21% did not reveal true facts about their wages. All workers in the organised sector however, disclosed true facts; consequently the figures in the unorganised sector is much more serious: 78.13% of females did not reveal the facts about their wages.

In fact, many workers who were aware of being exploited did even not approach the employer to demand an equal wage. Various reasons have been given by female workers for not approaching their employers: fear of losing their job, no hope of positive response from employers and traditional value system among females.

Table 7: REASONS FOR NOT APPROACHING THE EMPLOYERS REGARDING THE EQUAL WAGES.

To conclude, the enforcement of the Equal Remuneration Act leaves much to be desired. There are numerous stages where the implementation of the act could be and is mishandled. Discrimination in the market could take place through three main devices: discrimination during recruitment of workers, discrimination at the time of giving remuneration, and discrimination while allotting benefits such as pension, provident fund, gratuity, annual increments.

Discrimination in cases where two employees are clearly identified as those performing same work, or work of similar nature, is easy to identify, and perhaps could be checked through frequent and thorough checks by a labour inspector. However, in cases where it occurs at the recruitment stage, or where it is not evident that two workers are performing workers of similar nature, or when the employer discriminates by withholding pension and other benefits, enforcement isn’t so elementary and uncomplicated.

If discriminatory tendencies exist in the employers’ mind, these can only be eliminated by exposing the factory to competitive forces, following which the employer will no longer find such practices viable if his goal truly is profit maximisation. If, despite competitive pressures, the employer still continues to follow discriminatory practices, it can only be because he is willing to undergo losses caused by his practise; i.e. he is paying the price of discrimination. In this scenario: if the employer is inclined to have lower profits, and follow a restrictive hiring, and wages policy, there can be no decrees or statutes that can effectively prevent him from doing so.

Part III: Perspectives of those concerned

Before pronouncing judgement on the act, it would be efficacious to look at the act from the standpoint of the main players involved in the enforcement of the act.

One can identify three sets of such main players in the chain of events that would follow after such an act is enforced: the implementers or labour inspectors, the employers or owners of factories, and the employees or workers in such factories.

The Gendarme: labour inspectors

Labour Departments as mentioned before, are overburdened with work. There are 30 labour laws in India presently, including the Sick Industries Act, and the responsibility of enforcing all of these lies with labour inspectors. These inspectors’ activities range from conducting regular checks on factories: where they must take tours of the factories, inspect pay registers, check the facilities, dimensions of the rooms, toilets, and entertain any complaints that may arise. Inspectors must also conduct surprise visits on factories. Furthermore, they are charged with the job of making inquiries into all complaints/ violations, for which they may have to subpoena workers, employers, or documents.

As mentioned before, in Delhi, Mr. Arya, Assistant Labour Commissioner, Delhi, has said that he has only 60 inspectors to enforce all labour laws. Furthermore, as regards laws relating to Safety and Health, the government must have a health inspector. In Delhi, there is only one health inspector for all the factories. Mr. Arya has said that in such a scenario, where he is severely short-staffed, when inspectors do conduct visits on factories, the focus is not on the Equal Remuneration Act. Inspectors deem legislation such as the Minimum Wages Act, Factories Act, Employees State Insurance Act as of a higher priority, and hence enforcement of the Equal Remuneration Act is minimal. In the words of Mr. Arya: "When we have numerous cases of workers being paid wages at sub-minimum levels, how can we give importance cases where women are paid less than men, if they are both being paid wages above the declared minimum wage level."

The inspectors’ viewpoint, hence, is that there is no point in enacting lists of laws, if the country does not have the resources to enforce them. Such legislation only serves to enhance the already long list of laws in India, since the chances of effectively exacting compliance with them are quite remote.

Scrooge and his cronies: the employers

As could be guessed, employers are not in favour of the act. An employer feels it is restrictive, and creates unnecessary barriers to his aim of profit maximisation. There has been a lot of talk about laws governing an employers’ freedom to hire and fire, and they are all in agreement about the fact that such laws will only reduce the employer’s incentive to hire more workers. If an employer knows he will be saddled with a worker once hired, and the wages, benefits, working conditions, leave etc. are all regulated, he would avoid hiring them until he reaches the point where another worker is absolutely inescapable.

Manmohan Singh, former Finance Minister has said "by denying flexibility in deploying labour, government policies have unwittingly impeded the use of labour in the economy … Measures are therefore urgently needed to reduce the rigidities in the labour force." One can quote B V Talwar, an industrialist and exporter, who has written in an article titled "Special Economic Zones-Chinese Style", " if there is no law that can even persuade, let alone compel an employer to employ even one more worker, even though it can be conclusively proved that his enterprise can well afford such an addition. As against all the labour laws prohibit him, or at least make it extremely difficult to fire even one worker."

In fact, we have the word of a factory manager himself. The Personnel Manager, Pee Embro Exports Limited has said that if laws such as the Equal Remuneration Act did not exist, he would, in all probability, hire more workers in his enterprise.

Hence, all employers are, as can be anticipated not appreciative of the Equal Remuneration Act, and feel that the removal of the act would make running a factory or a business much easier and efficient.

The Motley crew: the workers

Lastly, one must of course, consider the views of the worker himself, or in this case, herself, since the female workers are the true `beneficiaries’ of the act.

Of course, most female workers are in favour of the act, and do view it as the only deliverance from the employers’ restrictive and discriminatory tendencies. This attitude is understandable since, if the act works to the benefit of the women workers, it would only be logical for them to support it. However, there is a certain small proportion of female workers who feel that the lower wages that accrue to them are justifiable, and warranted. In any analysis of the utility of the act, it would be very interesting to analyse their motives and reasons for having such an outlook.

Table 1: VIEWS OF RESPONDENTS REGARDING EQUAL REMUNERATION FOR SIMILAR WORK.

As can be seen, the proportion of women who feel that women ought to be paid wages lower than those paid to males is very low. However, the interesting aspect is that there is some number, albeit low, of women who actually feel that they should be paid lower wages. On the basis of information and hints received from the workers, three main reasons can be pinpointed as to why lower wages should naturally accrue to females. Most of the workers felt that women could not work as hard as men, 44.83% of the respondents attributed this to be the main causal factor behind unequal wages. 24.14% felt it was because men worked comparatively more than women, while 17.24% thought it was actually because female workers availed more leave than males.

Table 2: VIEWS OF WORKERS REGARDING THE CONCEPT OF EQUAL WAGES FOR MALES AND FEMALES: WHY FEMALE WORKERS FEEL THAT LOWER WAGES ARE WARRANTED.

The above reasons furnished by workers can be divided into two categories: those which may have an actual economic reasoning behind them, and those which relate to inherent biases and presumptions that exist in the minds of people.

The first category includes the reasons saying that women cannot work as hard as men can, they work comparatively less than men, and the fact that females avail of more leave than men. These may actually have sound economic sense behind them. To look at the issue logically, if these factors are present, for employers to pay women lower wages is only natural. In fact, to force them to pay higher wages to women would be a case of the government facilitating exploitation of the factory owners or entrepreneurs by workers. Employers must be allowed to pay workers exactly their worth, and the presence of such factors serves to reduce the worth of female workers from the perspective of running a business, and hence paying females lower wages becomes perfectly justifiable.

The second category includes factors that deal with biases and mindsets inherent in Indian society, which cause an employer to follow a restrictive policy. These of course, cannot be justified in economic terms, and seem quite frightening when one looks at the issue from the outlook of justice. However, what one does not understand is that an employer following such policies despite competition in his trade, is doing so at his own cost. The employer is now paying the cost for the sake of his `beliefs' or `biases'. The only way in which it would be possible for an employer to follow policies that are potentially profit reducing: which hamper his running of a business; and still survive would be if he received certain benefits from the government in the form of a subsidy or protection. In this case, the easier solution to the problem is to remove this protection. Once the employer is exposed to market forces, and he can no longer afford to follow policies which put him in danger of having to close down, he will automatically let go of such non-economic techniques and follow an equitable wage policy.

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