In May, the Karnataka government released the notification on minimum wages, equalising wages across 81 sectors of employment, with an average wage increase of 60% over existing levels. As per the notification, the minimum wage for unskilled workers will be ₹23,376 per month in Bengaluru, and ₹19,318 per month in small towns and rural areas. This difference of over ₹4,000 between wages in Bengaluru and the small towns is a reflection of the runaway inflation in metro cities. This move, which acknowledges the high cost of living in urban metros, is commendable.

In media interviews, the Karnataka Labour Minister said the minimum wage revision was carried out as per the directions of the Supreme Court. This highlights an often ignored fact of the jurisprudence around minimum wage in India — that the method for minimum wage determination is elaborately laid out and uniformly applicable across the country. Despite such a formula, the wide variation in prevailing minimum wages across States reflects the power of employers, and the complicity of labour departments in keeping wages below what is statutorily mandated.

Employers claim that higher wages drive up product costs and increase product demand thus fuelling inflation. However, reducing the wages of those at the lowest deciles of the Indian population in order to curtail their consumption cannot be the way to control inflation. Moreover, government statistics indicate that the consumption levels of the average household are yet to reach pre-COVID levels. There are other mechanisms available to the Government to control inflation, including adjusting the GST structure to control product costs.

Employers further claim that increasing wages will drive out industry. This is not necessarily true. The contribution of wages to total cost in most sectors is declining. Wages are not the only determinants of investment decisions. Several other factors such as infrastructure, economic climate, availability of skilled workforce, and industrial peace are equally important. The recent protests by garment and other factory workers in the National Capital Region region and in Uttar Pradesh for higher wages were a stark reminder of workers’ poverty and their desperation. It highlighted the importance of decent wages to ensure industrial peace.

Missing aspects

However, there remain important lacunae in the notification. First, it leaves out four important sectors: garment work, beedi rolling, agarbathi making and plantation work. All four sectors employ a large number of workers, with the majority being women. With the implementation of this notification, the wages of the workers in these four sectors would become around half the wages of the workers at a comparable skill level in the other 81 sectors covered by the notification. Beedi rolling, which is primarily home-based work, highlights the inter-generational perils of poorly paid employment. Children share the same space as their mothers, who are rolling beedis, which often results in them getting pulled into helping their mothers, restricting their ability to break out of the poverty trap. A decent minimum wage linked piece rate for beedi rolling could increase the options for these children.

Another issue is regarding the Variable Dearness Allowance (VDA). The VDA is meant to safeguard real wages against inflation for the period between two wage fixations, mandated to happen once every five years. The points-based wage neutralisation system in Karnataka unfortunately only protects fully real wages in the lowest unskilled categories. For the higher categories of semi-skilled and skilled workers, such protection is only partial. Further, with every wage revision, the old VDA formula becomes inadequate to protect real wages, and the points need to be revised. There have been union led court cases in the past for VDA revision along with wage revisions. The present notification should also address this lacuna.

The minimum wage notification is still a positive step, holding out potential for equitable growth in the State. It can also serve as an example for other States. It highlights an alternative paradigm, important at this time of increasing wealth disparity — that profits without super-exploitation should be the route to the “ease of doing business”.

Mohan Mani is a Visiting Fellow, National Law School of India University, Bengaluru