One size doesn’t fit all

Jan 17 2014, 19:26 IST
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SummaryIll-conceived proposal will hurt employers and job-seekers

The Centre proposes to amend the Minimum Wages Act of 1948 to allow for minimum wage setting at the national level. On the surface, this amendment seems employee-friendly but as a concept, it is unjust, irrational and myopic.

A single national minimum wage is toxic in a country where states are at various levels of development in terms of infrastructure, urbanisation, industrialisation, education, employment, and much else.

The move for a uniform floor wage has been driven by demands of the trade unions–a vocal and organised minority that accounts for just 6% of the labour force–which have always positioned their self-interest as national interest.

The proposal must not be pursued as it will hurt the country’s youth—India’s demographic dividend means that 10 lakh students will enter the labour force every month for the next 20 years—and the backbone of its employment base—organisations with less than 50 employees, which account for 99% of employment.

The minimum wages that states set are based on various factors like the cost of living, geography, skill levels, etc. For example, the monthly minimum wage rates vary from R11,969 in Delhi for the skilled to R3,900 in Odisha for the unskilled. Let us assume that Delhi’s current minimum wage of R297 a day becomes the new national minimum wage, which means that an employer in Odisha will have to pay R7,722 to hire an unskilled hand. Will Odisha, which has close to 5% unemployment rate at the existing wage of R3,900, be able to generate more jobs for its youth with a higher minimum wage?

The new proposal offers nothing but greater powers to the Centre, and expand its power over minimum wages from the current 45 industries to the 1,679 industries set by state governments. It will obviously take away the power of chief ministers to decide on how the labour markets function within their boundaries. It takes away the impetus to attract investments, and hence create jobs for many states.

The move will have a huge negative impact on jobs for young and low- skilled workers. It will take away the citizens right to wages based on skills and the cost of living in various geographies. It is bizarre to mandate that Tripura should have the minimum wage of Delhi given the huge differences in rentals, transportation costs, and standards of living. A one-size-fits-all approach can be a fatal error that would damage the very interest of those the Centre

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