Wages and Labour Productivity in Indian Organised Industry : An Empirical Investigation of Causality

The linking of wages with productivity has occupied a centre stage especially after the New Economic Policy of 1990 in India. Though wages and other components like bonus, etc are still determined to a large extent by statutory bodies and collective bargaining, productivity is entering into many wage agreements especially in private organised sector. As a result wage rate is higher in the organised sector than what it would have been in neo-classical market clearing model. To find the inter-relationship between wages and labour productivity in the Indian industry for the period 1974-75 to 1994-95, the Granger and Akaike criterion have been used. The empirical analysis finds a unidirectional analysis from Wages to Productivity