Discrimination in the payment of the Cost of Living Allowance (COLA) for public and private sector employees and the failure to gazette the new unit cost of Rs.280 computed by the Department of Census and Statistics (DCS) have prompted Sri Lanka’s trade unions to launch agitation campaigns against the government, trade union officials said.
Ravi Peiris, Director-General of the Employers Federation of Ceylon (EFC- employers association), however said though private sector employers are not legally bound to pay COLA to their workers, some firms make this payment as they have entered into collective agreements with trade unions, The present unit cost is Rs. 67 and now the cost of living allowances are paid not on percentage terms but at this rate per each point rise in the index. The unit cost is calculated in accordance with the household income and expenditure survey carried out by the DCS in order to compute the Colombo Consumer Price Index (CCPI).
The CCPI (1952=100) had been used as the official Consumer Price Index of Sri Lanka from 1953 to November 2008, till a new CCPI was introduced. At that time the unit cost was Rs. 2. The CCPI is not a ‘true measure’ of inflation during this period because its base is measured on the consumption pattern of a working class household 50 years ago, according to Wimal Nanayakkara, former Director-General of DCS in an interview with the Business Times. The new index called the CCPI(N) is based on the 2002 consumption patterns of all urban households in Colombo. Data was collected from 12 urban centres in Pettah, Maradana, Wellawatte, Dematagoda, Grandpass, Borella, Kirulapone, Dehiwala, Kotte, Nugegoda, Kolonnawa and Ratmalana compared to seven centres earlier. According to this survey the base period expenditure level was Rs.17,996.38 of CCPI (Base 2002). Accordingly the unit cost was Rs.180 but the trade unions and the EFC agreed to pay COLA at the rate Rs.67 per each point rise in the index. The unit cost is calculated by dividing the base period expenditure level by 100. He said that in the CCPI (N), the average monthly expenditure is Rs.17,996.38 as opposed to Rs.202.04 with the old index. Similarly, the average household size in the new index is 4.5 persons as opposed to the old which was 5.8 persons. He warned the public not to compare the two and added that the CCPI (N) puts inflation at a lower level.
The DCS recently updated the base period of the CCPI to 2006/07. The regular revision of the base period of CPI is a technical detail and it is the normal practice that requires reflecting the changing household consumption pattern, said Director, Price and Wages Department D.C.A. Gunawardena. The revision is based on the current consumer expenditure survey. The revised index CCPI (Base 2006/7) reflects the changes in consumer price at aggregate level more realistically. The base expenditure value of the revised index is Rs.27,972.11 and is taken as 100. This expenditure level is 55.4 % greater than the base period expenditure level of Rs.17,996.38 of CCPI (Base 2002).
This increase reflects the increased expenditure due to the higher income, prices and the changed composition of the consumption basket. The geographical coverage of consumers as well as price collection centres has been widened in the new index. Price collection centres have been widened from 12 markets to 14 markets in the Colombo district. According to this base expenditure value of the revised index of Rs.27,972.11, the unit cost of the index should be Rs. 279.7 or Rs.280 . The unions are demanding to gazette this unit cost but it is not a mandatory requirement, Mr. Gunawardena said.
EFC’S Peiris said employers were of the view that the payment of cost of living allowance is totally unproductive and it’s a payment over a fluctuating index which an employer has no control. Therefore the employer is unable to budget the wages bill. On the other hand it is a payment given to employees irrespective of work performance. With the introduction of the new index which came into operation in 2008, many employers have found it difficult to pay this allowance according to the unit cost stipulated by the CDS.
Therefore the EFC has negotiated with trade unions and entered into a few collective agreements without including a payment in relation to cost of living based on index. An agreement was reached to make a fixed payment and this was very progressive step in the right direction, he said. Eleven companies have signed collective agreements, he said. These companies have increased the performance based annual increments of workers which was very productive step he added. According to the 2008 revision of CCPI (Base 2002) the DG DCS has announced that the rate was Rs. 67 compared to the old rate of Rs 2. The recent update in the base period of the CCPI to 2006/07 and fixing the rate at Rs. 280 has not been gazetted like the previous occasion.
However some economists are of the view that various governments resort to introducing ‘new’ inflation indices including the Core Inflation Index, for allegedly political motives so as to exclude food and energy inflation, but as a result hide actual price trends which does not reflect the economic impact on middle and lower income groups, which constitute the bulk of Sri Lanka’s population. An index based on the consumption patterns of blue collar workers is needed to index wages. Such people spend a higher proportion of their income on items such as food. Locally produced foods such as vegetables, meat and fish, which monetary economists call 'non tradables', respond quickly to money printing because they cannot be readily imported when domestic demand pressure rises.
As a result, low income earning blue collar workers need cost of living allowances quickly to make ends meet, they said.
Anton Marcus, Joint Secretary - Free Trade Zone and General Services Employees Union said that they are demanding the authorities to gazette the new unit cost of the cost of living index amounting to Rs.280 and to pay the cost of living allowance for all private sector employees. At present the minimum wage of private sector employee is Rs. 7,950 while the public sector employee draws a minimum wage of Rs. 11.730. The public sector employees are also getting the cost of living allowance and an allowance of Rs. 67 for each increased unit in the cost of living index, he added.
This is discrimination and the government should rectify it. He revealed that his trade union will make representations to free trade zone employers union to increase wages of factory workers and to pay them the cost of living allowance. At the moment some factories are paying this allowance as they have entered into collective agreements with the trade union, he added.
The Marxist party Janatha Vimukthi Peramuna (JVP) affiliated Inter Company Employees Union (ICEU) has called on the government to take measures to gazette the increased cost of living allowance to the private and semi-government sectors.
The union has conducted a series of protest campaigns from September demanding the authorities to gazette the new cost of living allowance unit cost for the private and semi government sectors. ICEU Head Wasantha Samarasinghe said that around 200,000 private sector employees are receiving this (old) allowance. But the employers are not paying it now due to the failure of the DCS to gazette the new revision. He revealed that the union has written to the President to intervene in this matter.