Hi Friends,
                                              Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.
                                                  There is just no time to look back, no time to wonder,"Will anyone read these pages?"
                                       With regards,
                                       Hemen Parekh
                                       27 June 2013

Saturday, 27 December 1986

SUN RISES IN THE WEST —(Part V)—

Synopsis: Communication For Productivity
Letters written to some 7500 Workers / Managers / Union Leaders, following a period of strike / Go slow / Murders (1979 - 1987), at Mumbai factory of Larsen & Toubro Ltd. This direct / open / honest communication led to a remarkable atmosphere of trust between Workers and Management, which, in turn, increased productivity at 3% per year (ave).

27 Dec 1986

To:
Dear Friends

Sun Rises In the West
—(Part V)—

While  I  an)  waiting  for  the   list  of  our   restrictive work-practices  to grow, I promised  to tell you  what  is the SECOND THING that must happen for  creating jobs.

And that happens to be

"Wage-increases"   will  have   to  be   less   than  the inflation-rate.

Example

In France,  FORD MOTOR  CO. was  giving wage-increases  as high as 10% during 1980-84.

Last 2 years, it is giving no more than 4%!

Example     
Current average inflation-rate in Europe is  6%.    
Expected rise in manufacturing pay in 1986 is  5.75%.    
All wages are now increasing roughly  in line with prices!

Example

According  to Mr.  Larry Mishel, an  American Researcher, there  had been an  average  13% decline  in  wages since 1973 when adjusted for inflation.

RESULT NO. 9

Adjusted  for  inflation,  wage-cost  of manufacturing  a single  unit of  product declined  by  0.3% from  1982 to 1985  !!  - bringing  back  ability to  compete  with  the world.

Writing in Economic  Times of December 4, 1986,  ("America Worries Over  lost  Competitiveness"),  Jayshree Sengupta gives us following information:


IN 1985
JAPAN
AMERICA
1.
Average Annual Work-Hours
2100
1800
2.
Paid Annual Vacation (Days)
14.6
19.6
3.
Vacation Enjoyed (Days)
8.2
19.6
4.
Increase in Hourly Factory Output
5.6%
2.2%

But coming back to the question,     

"Why is America succeeding in creating  jobs ?"

Let  us  look at   the following   chart  from Business  Week (Sept.22, 1986)/

Compensation pains for all  Private Industry Workers


From the chart shown above, can we conclude  that,    

Lower Wages   —>         Lower Product cost   —>    More Demand                   
                     More jobs  <—  Factory  Expansion <


And while we are on  the subject of wages, let us see what  is happening 18000 Kms. away from America

-    In POWAI !
Annual Average Wage  * Bill per DR Employee (Powai + Madh)

Percentage Increase Over Previous  Year
*Basic +D.A.  + Payroll Related Allowances




I  know  that  some  of  you  will  immediately  jump  to  the conclusion and say,

"That is  why we are  losing jobs in  Powai.  Look at  the following chart"

DR - Employee Strength at Powai


Let me assure  you that there are  other reasons as well,  the most important  being that  no industry  is allowed to  expand within the Greater Bombay.

But  of-course, fast-rising  wages  continue  to be  the  main concern -  not only  for L&T but  for almost  all the  leading engineering  companies of  Bombay,  as you  can  see from  the following chart :

Total Emoluments - 1985 (Over 1983 = 100)


And  if   you  want  to   know  what  is   happening  to   the profitability of these companies,  keep looking at the  Notice Board for my next circular.

H. C.  PAREKH


 P.S.  In view of the Economy Drive, I am not sending individual copies.  If you get a chance to read this on the notice board do tell others.

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