Minimum wage: A fair revision would help workers and economy

The Minimum Wages Act, 1948 mandates the periodic revision of the minimum wage once every five years at least. Unfortunately, the revision hardly ever makes news, let alone become the subject of a vigorous political debate in the Assembly.

However, the impact of the revision has far-reaching consequences. The first question is, therefore, how many workers gain from the revision exercise.

Based on the data from the Economic Survey 2021-22 for Karnataka, the total size of the workforce in Karnataka is 3.91 crore and more than 2 crore workers fall under the category of wage workers.

The size of the organised sector is around 24 lakh, and one may within reason assume that workers in the organised sector earn more than the minimum wage.

Therefore, more than 1.7 crore workers in the state will benefit directly from the revision. The sheer size of the impact alone should qualify it as newsworthy and turn it into a political issue.

The revision of the minimum wage is based on scientific norms laid down by the 15th Indian Labour Conference and upheld by various Supreme Court judgements, most notably the landmark judgements of Reptakos Brett (1992 AIR 504) and U Unichoyi & others vs The State of Kerala (1962 AIR 12).

It is important to understand that the minimum wage is need-based, and the calculation of the minimum is the sum total of prices of food, clothing, shelter, transport, medical, education costs plus an additional component for socio-cultural activities such as marriages and festivals.

The minimum wage, thus calculated, is to provide for three consumption units of a worker’s family. Dietary considerations have been stipulated as per Dr Aykroyd’s diet of 2,700 calories per day for an Indian adult of moderate activity.

This being the established position, it is a matter of serious concern that the governments are adopting arbitrary norms for revising minimum wage.

For instance, recently the Karnataka government revised the minimum wage for an unskilled worker in the automobile sector in Bengaluru city at Rs 14,365. This begs the question: Is the minimum wage of Rs 14,365 enough to meet the requirements of food, clothing, shelter and other needs of a worker’s family in Bengaluru today?

The answer, unfortunately, is a resounding no. In the instant case, the government has provided a paltry increase of 10% over the earlier minimum wage and completely ignored the established norms to calculate the minimum wage at present-day prices.

The landmark Reptakos Brett judgement states: “The only reasonable way to determine the category of wage structure is to evaluate each component of the category concerned in the light of the prevailing prices. There has been a sky-rocketing rise in the prices and the inflation chart is going up so fast that the only way to do justice to the labour is to determine the money value of various components of the minimum wage in the context of today.”

Trade unions in Karnataka have carried out an exercise of calculating the components of the minimum wage based on present-day prices of commodities and the scientific minimum wage that answers to all the components is calculated at Rs 31,556.

The Karnataka government has decided to adopt a hair-splitting approach by differentiating between the terms “fixation” and “revision”.

The government’s argument is that calculation of the components of the minimum is necessary only during the fixation (first time), and that the government has discretion in the revision of the minimum wage and is not bound by the established method of calculating the components.

Now, this approach will create unintended consequences. In 2018, 21 new scheduled employments (such as e-commerce, NGOs, khadi sector etc) were introduced to cover workers in these industries.

The government is undertaking an exercise of calculating each of the components of the minimum wage in the case of these new scheduled employments based on present-day prices, whereas the revision of 82 existing ones is based on a wholly arbitrary increase of 10%.

This will result in a discriminatory wage structure between industries. When the wages for unskilled work is skewed, then distortions of the labour market such as excess supply to high-wage industries and reduced supply to low-paying ones are bound to occur.

The government is adopting a wholly vegetarian diet in order to depress the minimum wage, ignoring the realities of the socio-cultural preferences of people.

The National Family Health Survey-5 estimates that over 80% of the population in Karnataka are meat-eaters. The concept of minimum wage cannot be static and must reflect the present socio-economic reality of people. Therefore, it is important to cater for additional costs of communication and mobile phone data as well.

It is important for the government to realise that a scientific revision of the minimum wage will help kick-start private consumption and begin a virtuous cycle of renewed demand spurred by increased household consumption in the economy.

We must bear in mind that private consumption (which accounts for around 60% of the national GDP) has been on a downward spiral since 2020. The Covid-19 pandemic and rising inflation (especially food inflation) forced people to tighten their purse strings, pushed household budgets to the limit and increased indebtedness. A just revision of the minimum wage will not only aid workers, but also the overall health of the economy.

(The writer is General Secretary,
AITUC, Bengaluru)