The need to look beyond the Pay Commission

When more than 2.3 million people rushed to apply for just 368 positions for the job of a peon in the Uttar Pradesh government recently, including some with professional qualifications, it was widely seen as an indication of joblessness in the country. While it is correct that the economy has not been able to generate enough quality jobs for a growing workforce, it is also true that the government offers much higher wages, as well as perks, that are not available in most cases in the private sector. The rush to apply for government jobs is thus more a reflection of a massive wage premium at the lower levels of the labour market than sluggish job creation.

The Seventh Pay Commission, which submitted its report last week, has made such jobs even more attractive. Among the terms of reference before the commission was to design a “framework for an emoluments structure linked with the need to attract the most suitable talent to government service, promote efficiency, accountability and responsibility in the work culture, and foster excellence in the public governance…” It missed the opportunity to do something about this.

India needs to build state capacity to meet the challenges of the new century. It needs to replace the file pushers and file carriers who multiplied during the socialist era with an efficient civil service that knows how to regulate a modern economy, provide public goods, and manage a welfare system that needs better human capital. Governance is becoming increasingly complex, and the government needs to attract suitable talent to respond to the challenges of the 21st century.

However, the commission did not significantly deviate from the past in “principles of pay determination” and, as a consequence, it is unlikely that civil administration will change either. The commission, as has been the practice in the past, relied on need-based wage calculation. Clearly, the quality of output is not relevant in the exercise.

Based on the norms decided by 15th Indian Labour Conference in 1957, along with some supplements, the minimum wage was arrived at, and the difference with existing pay was adjusted across the board accordingly. Senior officers who shoulder maximum responsibility, and should be compensated adequately in the commission’s view, have been given a slightly higher index for adjustment.

A study conducted by the Indian Institute of Management, Ahmedabad, for the commission showed salaries in the private sector are much smaller at the lower level compared with government jobs, and that it is at the higher level where the government falls short in compensating employees.

However, the recommendation ignores this reality. The minimum wage recommended is more than double that of the going rate in the market, and since the structure of the government is bottom-heavy, it will continue to significantly overpay an average employee with practically no incentive to perform. In fact, the commission in its report said issues of productivity and efficiency should be looked at administratively.

To be sure, several committees and two administrative reforms commissions have looked into various aspects of civil administration in the past, but not much has changed over the years.

Taxpayers are periodically given a higher wage bill to settle, with no material difference in the quality of service from the government. This needs to change.

The nature of challenges and complexity of governance demands greater flexibility in hiring and wage setting. Today, there is no mechanism where high-performing individuals can be rewarded and non-performers can be reprimanded on a regular basis.

The commission has recommended that non-performers be “phased out after 20 years”, meaning annual increment be stopped for people who don’t meet the benchmark for assured career progression. Even if implemented, it is unlikely to have any impact.

Perhaps, it is time to debate the kind of changes required in civil administration, which has remained broadly what the country inherited from its colonial ruler.

Is civil administration in India equipped to tackle increasing complexities of governance?