27 Dec 1986
To:
Dear Friends
—(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%.
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)/
From the
chart shown above, can we conclude
that,
Lower Wages —>
Lower Product cost —> More Demand
And while we
are on the subject of wages, let us see
what is happening 18000 Kms. away from America
-
In POWAI !
Percentage Increase Over Previous Year
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.
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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