Minimum wage: next poll sop?

The proposal made by a committee appointed by the central government to effect a major hike in minimum wages has come handy for the government, which is offering various pre-poll bonanzas to different sections. Like farmers, the middle class and the income tax payers who have been offered some sops, it may be the workers’ turn now. The committee has recommended two sets of wages. One proposal is that the minimum wage should not be less than Rs 375 per day for work done for the government, private establishments and individuals. An alternative suggestion is for a range of wages from Rs 342 to 447 in five regions of the country. Karnataka is in the region that includes Tamil Nadu and Maharashtra, where the minimum wage is proposed to be Rs 414. The new rates are in some cases twice the existing rate, which in some states is just above Rs 200. The committee has formulated its proposals on the basis of the balanced diet requirements of workers and after considering their needs like house rent, education and entertainment. The new methodology is better than the old one.

While the need for wages that satisfy the reasonable and minimum needs of workers and ensure their dignity of life is well accepted, the timing of the proposal has been questioned. There have been demands for wage increases but the government has decided to make a move when the elections are in sight. There are doubts about the impact of the proposal in the present situation when economic growth is slow and profits are under pressure. Companies will be able to take the hike in wages in their stride when growth is strong and profits are high. Otherwise, the tendency would be to reduce the number of workers to minimise the impact of the hike. This has happened in the recent past even at the present wage rates. Studies have shown that labour intensity has come down in many sectors, and this in return has affected growth. In some ways, minimum wages are like minimum support prices for crops, whose periodical increases have not really helped the farmers.

The Centre has published the new proposals on the labour ministry’s website and asked for comments and suggestions. It is likely that the new wages will be notified soon, after consultations with the central advisory board on wages and other agencies. Acceptance by the central government may not mean that states will implement them immediately. Many states do not implement even the existing minimum wages, as the Minimum Wages Act, 1948, gives them the power to take their own decisions in the matter.