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Chapter 10

Chapter 10. Wage Reform & Wage Negotiation. Brief History of Wage System. Early years After independence Economic growth. 1985 Recession and Wage Reform. Rigidity in the wage system - seniority-based - long time scale - high maximum - fixed annual increment Need for wage reform

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Chapter 10

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  1. Chapter 10 Wage Reform & Wage Negotiation

  2. Brief History of Wage System • Early years • After independence • Economic growth

  3. 1985 Recession and Wage Reform • Rigidity in the wage system • - seniority-based • - long time scale • - high maximum • - fixed annual increment • Need for wage reform • New role of NWC

  4. Flexible Wage System • Link salary with profitability • Change with business conditions • Motivate with reward for performance

  5. Principles of FWS • Reflect job value • Increase: • - lag behind productivity growth • - consider company’s profitability • - consider worker’s performance • Stability in worker’s income

  6. Features of FWS • Basic wage - provide income stability • AWS: one month - adjustable • Variable component - based on performance

  7. Profit-sharing Model • Basic wage • Service increment • AWS: 1 month • Variable performance bonus

  8. Variable Productivity Payment Model • Basic wage • Service increment • AWS: 1 month • Variable productivity payment

  9. Problems Implementing FWS • Wage increase exceeds productivity • Wage exceeds job value • Lack performance appraisal system • Capping of bonus • Difficulty: productivity measurement • Reluctance to share information

  10. Wage NegotiationEconomic information • A) General economic indicators • B) Labour market indicators • C) Wage-related indicators • D) Company performance • E) Wage-productivity link

  11. A) General Economic Indicators • GDP • GNP per capita • Consumer price index (CPI) • Inflation rate

  12. B) Labour Market Indicators • Labour force • Participation rate • Unemployment rate • Educational profile

  13. C) Wage-related Indicators • Annual earnings by industry • Monthly wage by occupation • Annual wage increase • Productivity growth • Wage increase by industry

  14. D) Company Performance • Current vs. past performance • Compare with similar companies • Company’s prospects

  15. E) Wage-productivity Link • Measure of company’s performance • Individual worker’s performance • Acceptable formula • Access to information

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