A skilled blacksmith, carpenter, mason or electrician who works in rural Kerala earns a daily wage of Rs 741, as per the 2019 data of Labour Bureau of Government of India.

Image courtesy: The New Indian Express

THIRUVANANTHAPURAM: A skilled blacksmith, carpenter, mason or electrician who works in rural Kerala earns a daily wage of Rs 741, as per the 2019 data of Labour Bureau of Government of India. According to the Periodic Labour Force Survey, the average emoluments of a worker in own account enterprises are less than Rs 8,000 per month in manufacturing, less than Rs 6,500 in trade and less than Rs 6,000 in other services. Workers in establishments earn around Rs 9,000 in manufacturing, around Rs 10,000 in trade, and over Rs 11,000 in other services as monthly salary.

Compare this with the salary of a fresh recruit in the last grade government employee. As per the 11th pay commission, the minimum basic pay for a class four employee is Rs 23,000. In rural Kerala, the official will earn Rs 24,200 per month including the minimum HRA of Rs 1,200. Every year, the person is entitled to 85 normal holidays, 20 casual leaves and 33 earned leaves. That means the employee has to work only for 227 days per year to earn a full salary for 12 months. 

Factoring in all these figures, per-day wage of an unskilled class four employee, who has only basic high school education as qualification, will translate to Rs 1,279. A last grade government servant working in rural Kerala earns Rs 538 more per day than a skilled electrician or carpenter. In addition, he is entitled to pension and gratuity and medical reimbursement.

“The most intriguing fact is that the money for paying this fat cheque to a government employee is mobilised by the state by imposing direct and indirect taxes on the hardworking masses who earn meagre wages. The carpenter or autorickshaw driver spends part of his hard-earned wages for purchasing overpriced liquor or a lottery ticket to help the state pay its employees. Common people are not realising how they are looted,” says economist Jose Sebastian, former faculty of Gulati Institute of Finance and Taxation.

The massive government infrastructure the state has built over the past six decades has now become a liability with mounting revenue expenditure. Since the first E M S Namboodiripad government, the socialist outlook followed by changing governments had ensured that the state intervened on all economic fronts including markets. As a result, a large number of government departments, public sector enterprises, semi-government institutions and autonomous bodies under the government were launched.

“The size of the government is bigger in Kerala. During the last fiscal, we spent more money for salaries than Gujarat, Bihar, Telangana and even Madhya Pradesh which are much bigger states. Another factor is that 27% of the state government employees, who are paid from exchequer, are staff of private institutions like aided schools and colleges,” said B A Prakash, former chairman of state finance commission.

State Planning Board member K Raviraman disputes these arguments. He said the notion of viewing salary expenditure as revenue expenditure needs to change. “In fact, we have built a strong human capital using the investment in education, health and other social sectors. We have been able to maintain a high quality of human development which is also reflective in better quality of services both in health and education,” he said. 

The public health system in the state is now accessed by around 70% of the population as the state offers good service. More than 55% government employees are deployed in education and health sectors. K Mohandas, who headed the eleventh pay commission, said the priority now should be enhancing the efficiency of the government. “We have recommended technological interventions in all possible government departments. Skills of employees need to be enhanced,” he suggested.

The practice of implementing pay revision every five years was the major reason that led to the exponential increase in salary and pension bills over the years. The Mohandas commission recommended that the next commission needs to be formed after seven years only, following the next pay revision by the central government. In 2016, C N Ramachandran Nair commission recommended pay revision after 10 years, but the government rejected that recommendation.

“The public expenditure review committee realised this danger and recommended, in 2012, rescheduling pay revision in every 10 years,” said Prakash. Figures also suggest the latest pay revision amid the peak of pandemic was totally an unwanted exercise. When the previous pay revision was done, the dearness allowance (DA) of employees, which is linked to the cost of living, was 81% over the basic pay, while in the 2021 revision, the DA was a mere 28%. 

“In 2016, the government needed Rs 7,700 crore for implementing pay revision. The projection for the 2021 hike is an additional requirement of Rs 5,971 crore. But this is insufficient and the final figures will be scary,” said Prakash.

Pension a big drain
According to Jose Sebastian, paying pension would be a more daunting task for governments in the coming years. “I view statutory pension as a fraud committed on people. A friend of mine who earned Rs 66,000 as pension till March got it revised to Rs 77,000 in April. Pensioners are a segment which is withdrawing from consumption and the increase in money won’t be reaching the market,” he said.

Raviraman said the idea of a maximum cap for pension needs to be discussed. “The government can bring a cap of Rs 50,000 to Rs 60,000 for pension. The money thus saved can be used for improving social infrastructure for all elderly people,” he said.

Following the footsteps of other states, Kerala too migrated to the participatory pension model from April 1, 2013 by introducing the national pension system for newly recruited employees. One-fifth of the government employees are now part of the participatory pension scheme. According to estimates, the pension expenses will continue to grow till 2045 as all who joined services till March 31, 2013 are eligible for statutory pension.

While a skilled labourer earns Rs 741 a day in the state, a class 4 government employee gets Rs 1,279. The government mobilises the money for paying the salaries from hard-working private individuals, who do not have the benefits enjoyed by the government staff. It’s time the state revisited its priorities, say experts.

Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.

This article was first published in The New Indian Express

Jose Sebastian
Jose Sebastian
Dr Jose Sebastian is Senior Fellow (Finance) with CPPR. He retired as Senior Faculty in Public Finance from Gulati Institute of Finance and Taxation and is currently Chairman and Director of Institute for Enterprise Culture & Entrepreneurship Development, Thiruvananthapuram. An expert in Public Finance and Taxation, Dr Jose Sebastian writes for Economic and Political Weekly, IUP Journal of Public Finance, Asian Economic Review, among other well-known journals and magazines. Dr Sebastian earned his PhD and Masters in Economics from the University of Kerala. Dr Sebastian has been a member of important Committees constituted by the Government of Kerala, like the Sales Tax Advisory Committee, Expert Committee on Improving Statistical System in Kerala, among others.

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