The Centre has proposed a steep 60-95% hike in the minimum wages for its contract/temporary workers in 45 scheduled employment categories, ranging from agriculture to construction and mining, a move that could significantly increase the wage bills of central utilities including Indian Railways and energy and mining PSUs, besides inflating the government’s social security payouts.
While the labour ministry arrived at the new wage figures on the basis of the workers’ consumption pattern, official sources said the actual quantum of wage increases could turn out to even higher, as the Centre is under pressure from trade unions, which demand a massive 170% increase the lowest minimum wage for “the centre sphere.”
Coming close on the heels of the 23.5% increase in the Centre’s pay and pension bill from the 7th pay commission — the additional outflow in the current fiscal is Rs 85,000 crore — an across-the-board increase in minimum wages for workers of different sill levels in urban agglomerations and small towns could boost demand for food, cloth and mobile phones and fan inflation. In its bi-monthly policy review on August 9, the RBI had said the risks to its March 2017 target of 5% retail inflation continued to be on upside on factors like food inflation, services and the effect of the seventh pay panel. It, however, added that strong sowing and the positive progress of the monsoon augured well for the food inflation.
Post-pay commission, the monthly starting pay for the central government staff is Rs 18,000, while the monthly minimum wage demanded by trade unions for temporary workers in the central sector is Rs 15,000.
The Delhi government recently raised minimum wages by around 50% across categories making the minimum wage for an unskilled worker at Rs 14,052/ month.
The minimum wages for various scheduled employments were last hiked 5-10 years ago. According a government source, the Rs 350 per day minimum wage for an unskilled farm worker in Class C areas (as against Rs 211 now) has been arrived at after taking into account his four-member family’s energy need for 2,700 k cal a day as well as cloth, fuel, lighting, educational, medical and rental expenses.
Roughly estimated, this would cost Rs 305 a day or Rs 9,150 in a month. Considering four weekly-offs, the minimum daily wage is determined at Rs 350. The same pattern has been used for calculation of minimum wages in other catergories of area in “A” and “B” cities.
The wage hike proposed by the centre, however, is obligatory on states to implement as they are free to go by their own formulas. Still, the hike would have a spiralling effect not just on states, but across the economy, analysts said.
It would also fuel the demand for increasing the threshold limit for mandatory EPFO and ESIC contributions from Rs 15,000 now, as many categories of temporary workers, especially the highly skilled ones in major cities would cross this limit once the wage increases take effect.
Trade unions have been demanding to raise the minimum wage to not less than Rs 15,000 per month in their 12-point charter of demands. The government had in the last year assured them of putting in appropriate legislation for making formula-based minimum wages mandatory. Sources said the government is working out ways to so that workers of industries will get sector-specific minimum wages.