The distance from ground reality to optimistic wage proposals
Barring a few states, the minimum floor level of wages in India continues to lag behind those in most other countries including neighbouring Nepal and China. One of the tasks before the next government would be to take a decision on the recommendations of a new committee that has suggested almost doubling the minimum wage from Rs 176 per day to 375 per day (or Rs 9,750 per month) as of July 2018.
This is to be irrespective of skills, sectors, occupations and rural/urban locations for a family comprising a 3.6 consumption unit. It has also recommended an additional Rs 55 per day, i.e. Rs 1,430 monthly rent allowance (city compensatory allowance), for urban workers. There are currently many states which do not even ensure Rs 176 per day as minimum wages for casual and unskilled labour.
The recommendations of the committee appointed in 2017, which submitted its report in February this year, are expected to be taken up by the new government after the general elections in April/May, along with the new wage code legislation that, among other things, seeks to establish a single universal minimum wage across the country. Currently, apart from the national minimum wage fixed by the central government, several states have announced higher floor levels but, in most cases, failed to ensure compliance.
“In recent years, Karnataka has looked at ways of fixing minimum wages while other developed states like Maharashtra and Tamil Nadu have very low minimum wages, not in keeping with the progress in those states,” says G. Xavier Estupinan, ILO (International Labour Organization) wage expert and a member of the government-appointed expert committee.
ILO’s contribution to the report has been to give examples of how other countries have revised their minimum wages. It’s common for minimum wages to be revised every year in most countries. “At the floor level, India has the lowest minimum wages, even in South Asia,” says Estupinan, citing the example of Nepal, which has just revised its minimum wages, putting its national floor level higher than that in India.
“Even the minimum floor level in China is far higher now. As the Chinese economy grew, it was very conscious with regards policies on minimum wages, pushing each region to raise the floor level 10-13 per cent.,” says Estupinan.
Experts say that prescribing minimum wages gives workers bargaining rights. But it’s difficult to say whether the current proposal will come into implementation, particularly in the private sector. Himanshu, an associate professor of economics in JNU (Jawaharlal Nehru University) feels that the new report meets the criteria of sustainable minimum wages. “The way they have calculated the levels may seem to be on the higher side, but if you study it closely, it keeps to the original formulation that we have had on calculating minimum wages”.
Himanshu shares the concerns of other experts that ‘mandated minimum wages’, whether fixed by the Centre or by state governments, are not implemented in most states, or are limited only to people engaged in government run programmes. But even there, in most schemes, including NREGA, prescribed minimum wages norms have been violated by many states for the last 7-8 years.
Development expert N.C. Saxena, feels the new report fails to address the issue of gap between minimum wages and the actual wages being paid. “Unless that gap is bridged, a bare increase in minimum wages is not enough. In fact, the proposal would be counter-productive as the budget for government run labour intensive programmes like PMGSY, NREGA, etc would not be doubled, so the total of work would get reduced,” says Saxena.
Raghav Gaiha, a research fellow at the Global Development Institute of the University of Manchester, states that the methodology used for determining the minimum wage is conceptually and empirically flawed, and, if followed, could result in large distortions in the labour market. Worse, instead of helping poor labourers, “these could hurt them badly”.
“It’s not self-evident that the ‘fair’ minimum wage makes much sense in a labour surplus economy. In the labour market, the actual wage is the outcome of the interplay of supply and demand for labour. If there are high and low wage states because of restrictions on migration of labour, these are remediable,” says Gaiha.
Virjesh Upadhyay of the RSS-affiliated Bharatiya Mazdoor Sangh says the proposed minimum wage is too low. “It should be the same as what is fixed by the Centre, which is supposed to be a model employer. The central government’s periodic wage revisions should be the norm across the country, with no difference urban/rural or industry,” he says.
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