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Wage bargaining in plantations:

One size fits all approach, not appropriate - Study

The one size fits all approach to wage bargaining is not the most appropriate for the plantation sector states a study done by the Regional Plantation Companies through the Employers' Federation of Ceylon on the sustainability of the industry. The study themed the Long Term Profitability and the Productivity of Sri Lanka’s RPCs Tea and Rubber Sectors Implication for Wage Determination was done by Dr Ramani Gunatilaka a well-known economist of Monash University.

According to the findings of the study the high grown, mid grown and Uva teas have been making losses for at least half the period under consideration. The low grown tea sector profitability is dependent on the large bought leaf component which has effectively subcontracted green leaf production cost. Rubber is profitable because of good prices and high productivity levels.

The high grown, mid grown and Uva sectors are clearly unsustainable at current operating costs. Labour productivity has been either stable or has declined while the yield per hectare has risen only in mid grown and rubber sectors.

The high grown and Uva are the worst off as labour productivity and yield have declined. RPCs with more exposure in the low grown and the rubber sectors are able to withstand the losses generated by the high grown, mid grown and Uva sectors.

These sectors are clearly in trouble if they had not invested in replanting in earlier and/ or diversified into other profitable economic activities says the study.

The unit labour cost or nominal daily wages paid in the sector are lower than those prevailing in the informal market. The fact that the high grown, mid grown and Uva sectors have been posting persistent losses suggests that these sectors cannot afford any further increase in costs without implementing urgent structural reforms that can increase productivity levels. The low grown and rubber sectors are arguably in a better position to increase wages especially as the share of labour compensation in total value addition has declined in these sectors in recent years. The high labour costs is only one aspect and it should not blind stakeholders to what else is wrong in the sector.

The study further suggests that the RPCs need to decide whether processing or green leaf production makes more economic sense and also decide how much replanting needs to be undertaken.

The industry wide wage rate appears to have prevented the movement of labour between RPCs, sectors and divisions leading to acute labour shortages on some estates and labour surpluses in some others.

In many ways privatisation of the management of plantations has not entailed a sufficiently positive paradigm shift in the sectors orientation towards the market, states the study.

The RPC sector needs to be unbundled into profitable and loss making sectors so that profits as well as losses are immediately identifiable and quickly addressed.

The study states that wage bargaining also needs to be decentralised to free the movement of labour within the sector and enable wages to be determined on the basis of supply and demand providing incentives for workers to migrate from labour surplus plantation areas to labour deficit areas and help stem its migration out of the sector.

The Planters Association is the umbrella organisation of Regional Plantation Companies (RPC).

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