Sunday, September 25, 2005

Cost of labour in India

I have been noticing this interesting trend on cost of labour in India. I am not referring to the usual information technology cost of labor arbitrage that is now a norm for any IT organization. I am talking about regular labour costs for administrator / janitorial labour. Let me illustrate with an example, we bought a car about a year ago and we are paying a monthly outgo of Rs 5000.00 for the car. During that time we hired a driver for the car and we paid him Rs 3500 per month. That in itself represents about 70% of the cost of the car. Well that was the going rate for drivers at that time. A year passes and its time for a raise and we end up paying him Rs 4000 Per month now. This is now 80% of the cost of the car. At this rate, we will be paying him the cost of the car in two years from now plus other additional 'bata' that we pay him for over time.

This came as a revelation to me since I have seen the cost of labour being extremely high in developed nations leading to economic models where buying a new product is cheaper than getting an existing one fixed due to the cost of labour required to fix it. It looks like we are also moving in the same direction. How would the middle class indian society adopt to this kind of change? I am not sure. Maybe they will become more self reliant and move away from the hired help model? That I am afraid would actually reduce the number of available job opportunity which could mean a bad thing.

Whatever be our evolution path, I think that labour costs are going to raise to very high levels in the future and we need to learn to cope with it in new ways than what we have done before. Maybe the world of kaamvalis will be gone for good.

1 comment:

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