EDITORIAL / ECONOMY
Too little, for too long
Minimum wage regulations continue to defy the very meaning of what the
wage is for. The original premise - wages for people to live with minimum
level of economic security, as well as dignity - is gone, its spirit lost
in myriad variables that rise from states, sectors, bureaucracies and
15 February 2006 -
The weeks leading up to the Finance Minister's annual Budget speech in
Parliament are always a time for discussion on economic issues and public
policy. This year too, we can anticipate plenty of discourse on the nation's
GDP, growth rate numbers, planned infrastructure investments, tax breaks, and so
on. Usually, these conversations have to do with the better half - or more
accurately, the better-off 10% - of India, and perhaps as a result, they
focus on implications of budget policies for companies and industries. On the
other hand, personal incomes, especially those of the poor, receive far less
attention. And what little talk there is of incomes is usually limited to those
in the formal sector - organised, unionised workers as well as white collar people.
But a great multitude of our people work without adequate protections of laws
and budgets at the base of the economic pyramid. What about their incomes? What
is a decent monthly income that everyone in the informal economy too should be
able to secure? And how far are we from that goal? What is our promise for those
workers, who far outnumber the ones being counted on the pages of business
dailies? This is a key economic issue that our discourse appears to be missing
A bare minimum
A number of countries, India included, have legislated minimum wages in their
statute books. The wages are usually prescribed on an hourly basis, although
some laws mandate weekly or monthly minimum wages instead. Accounting for
federalism, in many large countries there is a national minimum wage, while
state/provincial and local governments are allowed to set their own wage levels
by local statute, adjusted to prevailing conditions. Minimum wages are also
usually prescribed regardless of profession; this is understandable, since they
derive from an understanding that all work
should be rewarded by a wage
that affords a minimum level of economic security, as well as dignity.
In many countries, also, periodically the minimum wages are revised to recognise
inflation in costs.
India's minimum wage law, the Minimum Wages Act of 1948, recognised the argument
for minimum protections, but has since fallen significantly behind. The law
itself is now nearly 60 years old - a time during which inflation has raised
costs several hundred percent - and does not set a specific minimum wage for all
provisions, instead leaving it to the states to set occupation-specific wages.
But, the states have largely had an anti-poor record in setting minimum wage
levels; witness the massive variation in wages across the nation from Rs.25 a
day - a ridiculously low figure - to a high of Rs.134, itself still questionable.
While some revisions in specific areas have been made apart from this Act, there
has been no revision of this law on an all-encompassing scale.
Who suffers the most, as a result? More than their counterparts in the organised
workforce, unorganised workers have borne the brunt of such neglect. Organised
workers have functional protections, especially in the form of collective
bargains by unions representing them, and are therefore not as much at the mercy
of pitiful wages. Moreover, unorganised workers are employed with millions of
employers - - virtually every small trade, enterprise, sole proprietor or
household - who cannot be gathered easily under the ambit of a law. This
diversity in the locations and nature of their work has left them vulnerable to
exploitation in the absence of a broad legal standard. As a result their wages
have long since failed to keep pace with rising costs, and continue
to diminish in real value over time.
We must also dwell here upon enforcement, since any legal minimum wage would
depend critically on this. If employers are not penalised for violations of the
law, then no meaningful advantage for workers can be derived from setting even a
high standard. Poor enforcement continues to plague many aspects of law in India
we recently reported on the massive undercounting of child labourers, for
example - and this is a separate administrative arena that needs tackling.
Meanwhile, look at the numbers. There is enough evidence to indicate that
minimum expenditures for a family of parents and children living in the slums
may run to around Rs.5000-6000 per month. And going by original minimum wage
levels set years ago and extrapolated to current costs of living, Kathyayini
Chamaraj reported in a recent article on India Together that Rs.215 per day
would be a decent minimum wage. But a classic example of state governments'
indifference to the working poor is that the Government of Karnataka has set the
minimum wage for domestic workers to be a paltry Rs.1600 per month. At that
rate, a person would need two jobs to make ends meet, even if one other person
in her household was also employed at minimum wages! Nothing can be more unjust
than these low levels.
Up to a fifth of monthly expenses for unorganised workers is for the schooling
of their children, although free and compulsory education is the law!
expenditure is also incurred on health care, although some of this too is
theoretically available from the State either free or at low cost, but in
practice remains inaccessible.
Minimised by the law
Coalition backs garment workers
Some economists argue that wage increases will help the economy; the poor
themselves will be spending more, and thereby offset the impact of higher costs.
Other economists prefer that the minimum wage be discovered by the market
itself, so that each profession's wage truly reflects the 'value' placed on it by
employers and consumers. They argue that a defined minimum wage would not
account for the variations in value placed on many kinds of work.
This may be true, but even many 'market-friendly' countries recognise that a
floor must be set for all wages to protect citizens against exploitative labour.
This must especially be the case in deeply hierarchical societies such as ours,
where value for wage work is more often not determined by ultimate worth, but by
caste and colour. Any market-based determination of wages can and must happen
above the legal floor. In fact, for all the talk about a 21st century
India going in a direction where governments encourage progress through
legitimate market forces, our legally determined wage levels are neither human,
nor enforced, nor in the spirit of what goes for workable regulation in a
"modernising" market economy.
Other skeptics and consequentalists will argue that hiking the minimum wage
levels any higher will drive wage labour further underground, and only result in
more corruption. But this otherwise well-made point needs to be addressed by
spirited enforcement, and not in throwing our hands up and backing away from
decent wage levels themselves. If anything, by setting wages so low, our
governments have continually legimitised exploitation, which is worse than
embracing the difficulties of enforcing a progressive law head on.
Raise the bar
Why do our governments set minimum wages so low? The reality is political. If
every employer of unskilled or low-skilled manual labourers was forced to pay
Rs.215 per day per worker, it would have a clear impact on costs in the economy.
Employers who have calculated low and illegal costs into their hiring may find
themselves unable to afford the workers they now employ. For businesses that
cannot make do without such workers, any revision in wages would amount to a
rise in costs that is bound to push up prices and hurt immediate profits.
Similarly, employers of domestic workers might be forced to consider their
lifestyle choices, being suddenly unable to afford the luxuries that are now
funded by subsidies from the working poor to richer paymasters.
Our governments know all this, and have always acted to protect politically more
powerful classes, by setting the minimum possible wages convenient to
different sectors of employers. Indeed, as readers will likely note by now, our
governments themselves are employers of workers; they expend money on various
projects partly as wages, and not surprisingly they act like most private
employers do, trying to cut costs by keeping wages low. Most budgeting for
public works for example, assumes the abysmally low levels of current minimum
Minimum wage regulations thus continue to defy the very meaning of what the
minimum wage is for. The original premise - wages for people to live with dignity -
is gone, its spirit lost in myriad variables that rise from states, sectors,
bureaucracies and notifications. And the resulting messy and meagre standards
cause spill-over damage in other areas too. Note, for example, the enshrinement
of disgracefully low wages in the National Rural Employment Guarantee Scheme,
relying on current minimum wage standards. The attempt to do justice in the
employment sphere is now hobbled by the injustice on wages.
We must breathe spirit into our Minimum Wages law and raise the bar. Minimum
wages for work must reflect our professed beliefs in dignity for
everyone, and also recognise the economic realities of our times. As the
discourse on economic matters gains its annual momentum, we must infuse into it
the reasoned - and regular, in future years - consideration of the economic
security of lower income groups as well. For a start, the Minimum Wages Act
should be updated to set a minimum national wage for all work, of Rs.135 per
day, the standard used in Kerala. Even this figure is far below what wages
should be, when adjusted for inflation from past decades. But setting the bar
this high would make a small beginning, and signal purposefulness in seeking
justice for the working poor.