07/07/2016 12:15 PM IST | Updated 15/07/2016 8:27 AM IST

7th Pay Commission: Great Ideas, But Will Actions Follow?

Hindustan Times via Getty Images
NEW DELHI, INDIA - JUNE 29: Finance Minister Arun Jaitley addressing media on the Seventh Pay Commission implementation at National Media Center on June 29, 2016 in New Delhi, India. In a bonanza, one crore government employees and pensioners will get a 2.5 times hike in basic pay and pensions under the 7th Pay Commission recommendations that will cost the exchequer annually Rs. 1.02 lakh crore, which the government says will have a multiplier effect on economy. (Photo by Virendra Singh Gosain/Hindustan Times via Getty Images)

The 7th Central Pay Commission (CPC) was constituted formally on 28 February 2014 and submitted its report on 19 November 2015. Over these 19 months, the Pay Commission -- led by a group of extremely capable and accomplished individuals -- scoured data and information from across the country, spoke to representatives of different interest groups, understood government finances, spoke to the private sector and analyzed patterns around the world. While debating the outcomes of this report, we often forget about the enormity of this exercise -- a quick analysis of the report shows the committee spent more than 100 days in formal discussions with organizations as diverse as the Films Division's Cameramen Association in Mumbai, the Defence Institute of High Altitude Research in Leh and meetings with the Australian Public Services Commission in Canberra thrown in the middle! Understanding expectations and structuring a solution for something as sensitive as pay from the diversity that India represents is a superhuman exercise, and we must congratulate the men and women who embarked on this mission.

More money in the hands of public servants without any changes to the accountability structure is one such potential challenge...

Now that the report has been approved and implemented by the government of India, there is a fair bit of "apprehension" about what this means for employees across government jobs, in the public and private sectors as well as for the economy at large. Firstly, there is going to be more money in the economy and as with all previous pay commissions and the NREGA experience, with additional money in the economy absolute wages will go up -- inflation notwithstanding. So yes, we can expect a wage inflation to happen outside of government jobs. The wage inflation, however, will be more substantial for employees in the junior cadres of public and private sector jobs. And I am not sure if it is such a bad thing -- we are all aware of the ridiculously large wage disparity between senior management and junior/entry-level employees in the private sector, and hopefully this will lead to a marginal reduction in that disparity.

At another, somewhat more fundamental level, this wage inflation should help the economy get a bit of a spending-linked impetus. For India, domestic consumption growth is paramount for the economy to be able to realistically grow when the global economic situation simply refuses to provide any support. I believe the Commission has spent a lot of time on this topic because while there is a significant amount of money being pumped through these new recommendations, the scale of change has not been as dramatic as some would have feared (or in some cases, hoped).

The point of this entire exercise is not to make people earn more, but to ensure that the government becomes a better and more efficient employer.

There is also a big debate that this will make early-career jobs in the private sector less attractive than government employment. I wonder why we are even debating this! For generations we have complained about poor pay in the government leading to lower efficiencies in the system -- if better pay is actually able to attract more competent people into that organization, we should actually be celebrating this change.

We should also thank the 7th Pay Commission for placing so much stress on matters such as long-term savings, retirals, group insurance, health insurance, NPS etc. These are critical for creating a more sustainable and sensitive employment relationship between the government and its employees.

But with any such change, the real challenges do not usually emanate from the recommendations but from the implementation. More money in the hands of public servants without any changes to the accountability structure is one such potential challenge -- the 6th Pay Commission (and now the 7th) has repeatedly asked for more effective implementation of the Performance Related Pay programs. It will be a shabby reflection on the government if it is not able to drive this structure in this round as well. And finally, given our socio-economic structure, while a lot of the focus will remain on ensuring that pay corrections and benefits impact the people at the bottom of the pyramid, it is going to be equally important to ensure that the government becomes an equally attractive employer for the people at the top. The point of this entire exercise is not to make people earn more, but to ensure that the government becomes a better and more efficient employer.

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